Coinbase, one of the most popular cryptocurrency exchanges, is in the news after a shareholder filed a proposed securities class-action lawsuit against the company on Thursday over its Nasdaq listing. The lawsuit claimed that the company misled investors about its financial situation before going public, stating that the stock’s price had plunged since its April debut, contrary to the representations in its offering documents.
The class action was filed in California’s Northern District Court by legal firm Scott + Scott, and named shareholder Donald Ramsey as the plaintiff, both individually and on behalf of other similar investors.
Ramsey said in his case that Coinbase omitted to explain issues that could have influenced investor decisions when it went direct. Its failure to communicate that a “significant cash injection” was required, as well as the exchange platform’s lack of resilience against “service level disruptions that were increasingly expected to occur as the firm extended its services to a bigger user base,” was among them.
The investor is pursuing these claims under the United States Securities Act. These statements were based on publicly available information regarding Coinbase, including regulatory filings with the Securities and Exchange Commission (SEC), business press announcements, and analyst reports, among other things.
Other defendants in the action include CEO Brian Armstrong, CLO Paul Grewal, and other top executives and venture capital backers, in addition to the firm itself. Ramsey is representing a group of tens of thousands of investors who bought Coinbase’s Class A common stock based on the company’s offering materials when it went public.
Ramsey further said that after investors realized the company’s reality, its stock dropped about 10% in two trading days in mid-May, when Coinbase stated it was planning to raise $1.25 billion, but only through a convertible bond issue owing to a cash shortage.
Furthermore, performance issues surfaced about the same time as network congestion revealed platform-wide technical flaws. The class action claims that such technological flaws harm the company’s reputation and that the company’s value hinges on its ability to provide traders with a secure environment.
Plaintiff and other class members have incurred considerable losses and damages as a result of defendants’ illegal acts and omissions, as well as the precipitous decrease in the market value of the company’s securities.”