Coinbase Faces Shareholder Lawsuit After SEC Investigation Misrepresentation

• A New Jersey judge ruled that Coinbase shareholders can sue over misleading disclosures related to SEC regulatory actions.
• The lawsuit accuses Coinbase executives of downplaying the risk of an SEC enforcement action, impacting shareholder decisions.
• The court’s decision adds to Coinbase’s ongoing legal struggles while the company remains active in political lobbying efforts.

A federal judge in New Jersey has ruled that Coinbase shareholders can proceed with a class action lawsuit over the company’s portrayal of potential regulatory action by the Securities and Exchange Commission (SEC). The ruling, issued by U.S. District Judge Brian Martinotti on Sept. 5, represents a significant legal challenge for Coinbase.

Shareholders Allege Misleading Disclosures

The lawsuit, led by Swedish pension fund Sjunde AP-Fonden, accuses Coinbase, along with CEO Brian Armstrong and other executives, of downplaying the likelihood of an SEC enforcement action. The plaintiffs argue that the company provided misleading information regarding the risks associated with regulatory scrutiny, potentially leaving investors at a disadvantage.

Judge Allows Scrutiny of Bankruptcy Risk Disclosures

Judge Martinotti also ruled that shareholders could examine Coinbase’s disclosures related to bankruptcy risks. The court acknowledged that these disclosures were essential for investors assessing the company’s financial health. This decision comes as Coinbase stock has been under pressure, with its shares experiencing an eight-day loss streak as crypto prices continue to underperform.

This ruling adds to Coinbase’s ongoing legal challenges, including a civil complaint filed by the SEC earlier this year. In March, a federal judge in New York denied Coinbase’s motion to dismiss the SEC’s lawsuit. Despite these setbacks, Coinbase has seen some success in court. Recently, a judge ordered the SEC to provide key information for the company’s defense in its ongoing legal battles.

Coinbase Continues Political Lobbying Efforts

Despite its legal hurdles, Coinbase has been active in lobbying efforts, particularly during the U.S. election cycle. The company has supported pro-crypto candidates and super PACs like Fairshake to push its agenda. Chief Legal Officer Paul Grewal recently expressed optimism that a pro-crypto Congress is likely, regardless of the outcome of the November presidential election.