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- United States Securities Act forms the basis of class action
- The class action has also named CEO Brian Armstrong, chief legal officer Paul Grewal as defendants
- Timing of the Bond Issue suspect
Coinbase and officials are facing legal action over Nasdaq Listings. The class action names CEO Brian Armstrong, CLO Paul Grewal, and several top officials and several venture capital backers as defendants besides Coinbase itself.
Coinbase charged for purportedly misinforming investors.
A Coinbase shareholder charged Coinbase for purportedly misinforming investors ahead of its public listing about the Company’s financial state and robustness as a crypto trading platform. The securities class action was filed by law firm Scott + Scott in the California Northern District Court on Thursday. The class action has named shareholder Donald Ramsey as a plaintiff, both individually and on behalf of all other investors similarly situated.
Ramsey has made United States Securities Act as the basis of his claims and has presented and has extracts of Coinbase’s regulatory filings with the U.S. Securities and Exchange Commission, company press releases, analyst reports, and other publicly disclosed information about the exchange as evidence The Company has been made a party but the class action has also named CEO Brian Armstrong, chief legal officer Paul Grewal and other top executives as defendants, as well as several of its venture capital backers.
Executives gave deceptive statements.
Ramsey has leveled serious charges against Coinbase and its executives. He accused the executives of offering significantly deceptive statements in their offering materials at the time of the public listing. He also accused Coinbase of offering positive reports that lacked a reasonable basis.
Ramsey added that when Coinbase gave the offering, it was in dire need of a sizable cash injection. The Company’s platform was also at risk of service level disruptions, which were increasingly likely to occur. Ramsey said that when the alleged anomaly between presentation and reality came into the public domain, Coinbase’s prices fell. Referring to events in mid-May,
Coinbase said it needs funds and accordingly announced plans to raise $1.25 billion through a convertible bond sale. Ramsay noted that the Company’s stocks tanked by close to 10% in two trading sessions.
The class-action points to contemporary media reports in mid-May, citing a Forbes report on the bond sale announcement. Investors were puzzled by the timing of the issue since Coinbase went public in Mid April through direct listing where issuing new shares or raising capital is not involved. It also meant that Coinbase does not need any funds. After a month elapsed,
Coinbase issued bonds, and the timing raises many issues.
Ramsey also points out the technical difficulties on the platform just when the market was in a bearish phase. On May 19, the market turned brutally bearish, and investors were scrambling to get their money out. However, they experienced “delays […] due to network congestion.”
It was widely reported in the media that there were delays in Ether (ETH) and ERC-20 token withdrawals due to congestion on the Ethereum network.
`On that day, delays were experienced by users on both Coinbase and Binance. Gemini exchange also announced that it is taking emergency maintenance actions to correct ongoing issues.
The class action described the service-level technical issues contrary to the Company’s claims to be the most accessible place to buy and sell crypto in the retail market. Since the Company is reliant on transaction fees as its revenue, this is even more important.
When Ramsey started the class action, Coinbase’s 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.
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