Class Action Suit Hits Coinbase over Allegedly Selling Unregistered Securities
Nadaq-listed cryptocurrency exchange Coinbase is hit with a class-action lawsuit. According to court documents, filed last week, the platform is accused by lead plaintiffs and Coinbase users, Christopher Underwood, Louis Oberlander, and Henry Rodriguez, that over the alleged claim it is selling digital assets as unregistered securities.
According to the plaintiffs, “Coinbase’s sale of these tokens violates both federal and state law,” adding that:
“During the period of October 8, 2019, and the present, Coinbase has used [their] platform to buy from and sell to customers 79 different digital assets at issue in that action.
But what Coinbase has not disclosed is that the tokens are in fact securities, and Coinbase is selling these securities despite the fact that there is no registration statement in effect for these securities and despite the fact that Coinbase has refused to register either as a securities exchange or as a broker-dealer.”
The plaintiffs continued:
“Purchasers do not have access to the disclosures that accompany the issuances of traditional securities. Rather, investors receive — at most — only the so-called whitepapers, which describe the token, but do not satisfy the requirements for a prospectus under federal and state securities laws.”
The 79 cryptocurrencies named in the lawsuit are 1INCH, AAVE, ACH, ADA, AGLD, ALGO, AMP, ANKR, ARPA, ATOM, AUCTION, AXS, BAL, BAND, BAT, BNT, BOND, BTRST, CGLD, CLV, COMP, CRO, CRV, CTSI, CVC, DNT, DOGE, DOT, ENJ, EOS, FARM, FET, FIL, FORTH, GNT, GRT, GTC, ICP, IOTX, KEEP, KNC, LINK, LOOM, LRC, MANA, MATIC, MKR, MLN, NKN, NMR, NU, OGN, OMG, ORN, OXT, PLA, POLY, QNT, QUICK, RARI, REN, REP, RLC, SHIB, SKL, SNX, SOL, STORJ, SUSHI, TRB, TRIBE, UMA, UNI, XLM, XRP, XTZ, XYO, YFI, ZRX.
The litigation also states that since trades made on Coinbase are not recorded on the blockchain and can therefore not considered as transfers of assets between users:
“The trades conducted [on Coinbase] do not in fact happen on [any] blockchain and do not actually involve the transfer of any assets between users. Instead, it is Coinbase that faces both the buyer and the seller.
Thus, if Angela wishes to trade one Bitcoin for ten Ethereum on Coinbase, Coinbase will update its internal records to debit Angela’s account one Bitcoin and credit it ten Ethereum; no actual crypto-assets are moved on the blockchain.
Nor is there any sense in which Angela’s Bitcoin is transferred to anyone other than Coinbase.”
According to the Securities Act of 1933, all securities, or assets that are traded between parties in the open market, have to be registered with the U.S. Securities and Exchange Commission (SEC).
The plaintiffs seek to “recover damages, consideration paid for tokens, and trading fees, together with interest thereon, as well as attorneys’ fees and costs, to the fullest extent permitted by law.”
The lawsuit documents refer to SEC Chairman Gary Gensler on multiple occasions. His agency is currently in a legal battle with Ripple Labs who they accused of selling its native token XRP as an unregistered security.
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Source: igaming
