Alongside Coinbase itself, the class action names CEO Brian Armstrong,
CLO Paul Grewal, other top executives and several of its venture capital
backers as defendants.
A Coinbase shareholder has filed
a securities class action against Coinbase for allegedly misleading
investors ahead of its public listing about the company’s financial
state and resilience as a crypto trading platform.
Filed by law
firm Scott + Scott in California Northern District Court on Thursday,
the class action names Coinbase shareholder Donald Ramsey as a
plaintiff, both individually and on behalf of all other investors
similarly situated.
Ramsey is pursuing his claims under the
United States Securities Act and has presented evidence drawn from
Coinbase’s regulatory filings with the Securities and Exchange
Commission (SEC), company press releases, analyst reports and other
publicly disclosed information about the exchange.
Alongside the
company itself, the class action names CEO Brian Armstrong, CLO Paul
Grewal and other top executives as defendants, as well as several of its
venture capital backers.
Ramsey accuses Coinbase and its
executives of making “materially misleading statements” in their
offering materials at the time of the public listing and offering
positive statements that “lacked a reasonable basis.” The class action
alleges that:
“At the time of the Offering: (1) the
Company required a sizeable cash injection; (2) the Company’s platform
was susceptible to service-level disruptions, which were increasingly
likely to occur as the Company scaled its services to a larger user
base.”
Ramsey further alleges that once the alleged
discrepancies between self-presentation and reality came to public
light, Coinbase’s share price fell accordingly. Citing events in
mid-May, when Coinbase conceded it needed to raise funds and announced
plans to raise $1.25 billion through a convertible bond sale, Ramsey
emphasizes that the company’s stock sharply declined by close to 10%
over two trading sessions.
The class-action marshals evidence from
contemporary media reports in mid-May, citing a Forbes’ report on the
bond sale announcement:
“Investors were also likely
surprised by the timing of the issue, considering that Coinbase just
went public in mid-April via a direct listing (which doesn’t involve
issuing new shares or raising capital), signaling that it didn’t require
cash. So the company’s decision to issue bonds a little over a month
later is likely raising some questions.
Ramsey’s class
action also points to the technical difficulties on the platform on May
19, when a surge of traders hoping to “get their money out” during a
bearish period in the crypto markets experienced “delays [...] due to
network congestion.”
As Cointelegraph reported at the time, delays in Ether (ETH) and ERC-20 token withdrawals ostensibly due to congestion on the Ethereum network were experienced that day by users on both Coinbase and Binance.
While not indicating the reason, the Gemini exchange also announced
that it would be taking emergency maintenance actions to correct ongoing
issues.
Related: ETH developer Virgil Griffith back in jail after allegedly checking Coinbase account
The
class action argues that these kinds of service-level technical issues
are critical and damaging for the company’s claims to be the easiest
place to buy and sell crypto in the retail market. The complaint
emphasizes this all the more so, given that the company is reliant on
transaction fees to “generate nearly all of its revenues.”
By the
time Ramsey commenced the class action, Coinbase stock was trading at
$208 per share compared to its opening price of $381 on April 14.
Counsel
for the defendants had reportedly not yet appeared as of Thursday.
Cointelegraph has reached out to Coinbase representatives for comment
and will update this article accordingly.
source link : https://cointelegraph.com/news/coinbase-and-top-execs-face-securities-class-action-over-nasdaq-listing
