Kessler Topaz Meltzer & Check, LLP Files a Securities Fraud Class Action Lawsuit Against Coinbase Global, Inc. With Expanded Class Period

By: Kessler Topaz Meltzer & Check, LLP via Business Wire

September 27, 2022 at 19:04 PM EDT

The law firm of Kessler Topaz Meltzer & Check, LLP informs investors that the firm has filed a securities fraud class action lawsuit against Coinbase Global, Inc. (“Coinbase” or the “Company”) on behalf of investors who purchased or acquired Coinbase (NASDAQ: COIN) securities between April 14, 2021, and September 21, 2022, inclusive (the “Class Period”). This action, captioned Laffoon v. Coinbase Global, Inc., et al., Case No. 2:22-cv-05744 (the “Laffoon Action”), was filed in the United States District Court for the District of New Jersey.

There is another related class action case pending against Coinbase in the United States District Court for the District of New Jersey. That first-filed action issued a notice of its filing pursuant to the federal securities laws which triggered the deadline of October 3, 2022 for any investors who purchased Coinbase securities to seek to be appointed as a lead plaintiff representative of the class. The filing of the Laffoon Action does not change the October 3, 2022 lead plaintiff deadline.

CLICK HERE TO SUBMIT YOUR COINBASE LOSSES

LEAD PLAINTIFF DEADLINE: OCTOBER 3, 2022

CONTACT AN ATTORNEY TO DISCUSS YOUR RIGHTS:

Jonathan Naji, Esq. (484) 270-1453 or Toll Free (844) 887-9500 or Email at info@ktmc.com

COINBASE’S MISCONDUCT

Coinbase, a Delaware corporation, is one of the world’s largest crypto asset exchanges. Coinbase’s common stock trades in the United States on the NASDAQ under the ticker symbol “COIN.”

The Class Period begins on April 14, 2021, to coincide with the Company’s initial listing of common stock on the NASDAQ (the “Direct Listing”). The Registration Statement and Prospectus filed in connection with the Direct Listing (collectively, the “Listing Documents”) included a letter from Defendant Brian Armstrong—the Company’s co-founder, Chief Executive Officer, and Chairman—in which Armstrong touted Coinbase’s commitment to maintaining customer trust. Defendant Armstrong also emphasized the Company’s commitment to compliance, stating that “[f]rom the early days, [the company] decided to focus on compliance, reaching out to regulators proactively to be an educational resource, and pursuing licenses even before they were needed.” Highlighting customers’ ability to rely on Coinbase as a crypto asset custodian in the Listing Documents, Defendants also noted Coinbase’s ability to “support over 90 crypto assets for trading or custody.” Additionally, while Defendants described certain risk factors relating to the safeguarding of customers’ assets, they gave no indication that assets held in custody may be treated as the Company’s property—rather than customers’—in the event Coinbase entered bankruptcy. Finally, the Listing Documents described the limited circumstances in which Coinbase sold its own crypto assets, with Defendants explaining that revenue from such sales was limited to “periodic[]” instances in which, “as an accommodation to customers, [Coinbase] may fulfill customer transactions using [the Company’s] own crypto assets.”

Throughout the Class Period, Defendants continued to tout Coinbase’s strength as a crypto custodian and commitment to regulatory compliance, in addition to denying that Coinbase engaged in any proprietary trading. For example, during a Goldman Sachs financial services conference on December 7, 2021, Defendant Emilie Choi—the Company’s President and Chief Operating Officer—emphasized the Company’s firm policy against proprietary trading, explaining: “I mean I think it’s kind of obvious in a way. It’s just people don’t want to feel like you’re trading -- institutions don’t want to feel like you’re going to be trading against them. And so we’ve always had a clear line about not doing that.”

However, the truth began to emerge on May 10, 2022, when Coinbase filed its first quarter 2022 financial report with the SEC. In that report, Coinbase disclosed for the first time that, “because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets [the Company] holds in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.” Later that day, Defendant Armstrong admitted on Twitter that Coinbase had failed to appropriately communicate this risk to investors, stating that Coinbase “should have updated [its] retail terms sooner” and acknowledging that the Company “didn’t communicate proactively.” Following this news, the price of Coinbase common stock declined $19.27 per share, or more than 26%, from a close of $72.99 per share on May 10, 2022, to close at $53.72 per share on May 11, 2022.

Investors continued to learn the truth when, on July 25, 2022, Bloomberg published an article revealing that the SEC was investigating whether Coinbase “let Americans trade digital assets that should have been registered as securities” and explaining that “[i]f those products were deemed securities, the firm could need to register as an exchange with the SEC.” Following this news, the price of Coinbase common stock declined $14.14 per share, or approximately 21%, from a close of $67.07 per share on July 25, 2022, to close at $52.93 per share on July 26, 2022.

Then, on September 22, 2022, The Wall Street Journal reported that Coinbase had created a business group—the Coinbase Risk Solutions unit—in July 2021 “to generate profit, in part, by using the [C]ompany’s cash to trade and ‘stake,’ or lock up cryptocurrencies,” a practice that sources at the Company characterized as “‘proprietary’ trading.” According to The Wall Street Journal, the group completed a $100 million investment in 2022 to “profit in cryptocurrency markets,” and the transaction generated an “eagerness to make additional such transactions” within the Company. Following this news, the price of Coinbase common stock declined $4.70 per share, or nearly 7%, from a close of $67.64 per share on September 21, 2022, to close at $62.94 per share on September 22, 2022.

The Laffoon Action alleges that, throughout the Class Period, the Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts, about the Company’s business and operations. Specifically, Defendants misrepresented and/or failed to disclose that: (1) crypto assets Coinbase held as a custodian on behalf of its customers could qualify as property of a bankruptcy estate—and not the Company’s customers—in the event Coinbase filed for bankruptcy; (2) Coinbase allowed Americans to trade crypto assets that the Company knew or recklessly disregarded should have been registered as securities with the SEC; (3) Coinbase had plans to, and did in fact, engage in proprietary trading of crypto assets; and (4) as a result, Defendants’ statements about the Company’s business, operations, and prospects lacked a reasonable basis and misled investors regarding material risks attendant to Coinbase’s operations.

WHAT CAN I DO?

Coinbase investors may, no later than October 3, 2022 seek to be appointed as a lead plaintiff representative of the class through Kessler Topaz Meltzer & Check, LLP or other counsel, or may choose to do nothing and remain an absent class member. Kessler Topaz Meltzer & Check, LLP encourages Coinbase investors who have suffered significant losses to contact the firm directly to acquire more information.

CLICK HERE TO SIGN UP FOR THE CASE

WHO CAN BE A LEAD PLAINTIFF?

A lead plaintiff is a representative party who acts on behalf of all class members in directing the litigation. The lead plaintiff is usually the investor or small group of investors who have the largest financial interest and who are also adequate and typical of the proposed class of investors. The lead plaintiff selects counsel to represent the lead plaintiff and the class and these attorneys, if approved by the court, are lead or class counsel. Your ability to share in any recovery is not affected by the decision of whether or not to serve as a lead plaintiff.

ABOUT KESSLER TOPAZ MELTZER & CHECK, LLP

Kessler Topaz Meltzer & Check, LLP prosecutes class actions in state and federal courts throughout the country and around the world. The firm has developed a global reputation for excellence and has recovered billions of dollars for victims of fraud and other corporate misconduct. All of our work is driven by a common goal: to protect investors, consumers, employees and others from fraud, abuse, misconduct and negligence by businesses and fiduciaries. At the end of the day, we have succeeded if the bad guys pay up, and if you recover your assets. For more information about Kessler Topaz Meltzer & Check, LLP please visit www.ktmc.com.