PANews reported on February 19 that according to Cointelegraph, Coinbase and several of its executives have been sued by shareholders, accusing them of misleading investors about the company's bankruptcy risks and violating securities laws. On February 18, Coinbase shareholder Wenduo Guo filed a lawsuit in the New Jersey Federal Court, claiming that Coinbase and its leadership failed to disclose that customer assets could be considered part of Coinbase's bankruptcy property, making retail customers unsecured creditors.
The lawsuit states that at least 75 crypto exchanges collapsed before Coinbase went public in April 2021, leaving customers of those exchanges unable to recover their digital assets. "Despite repeated denials by company management, Coinbase is no different in terms of the risk of losing digital assets in the event of bankruptcy." The lawsuit also claims that Coinbase failed to disclose its proprietary trading to compensate for falling cryptocurrency prices, which the lawsuit calls a "risky use of company funds to trade assets."
Wenduo Guo's lawsuit also mentioned the SEC's lawsuit against Coinbase in June 2023, accusing the company of listing unregistered securities and not registering with the agency. The lawsuit accused several executives, including CEO Brian Armstrong, of selling millions of shares and making hundreds of millions of dollars in personal profits. Wenduo Guo claimed that these actions caused Coinbase huge losses, regulatory penalties, lawsuits, and reputational damage. The lawsuit requested a jury trial and sought compensation and corporate governance reforms to prevent similar misconduct from happening again.
