An internationally recognized law firm has filed a securities class action lawsuit alleging that Coinbase made misleading statements during the crypto exchange’s initial public offering (IPO).
Scott+Scott Attorneys at Law LLP filed the lawsuit against Coinbase in the California Northern District Court on Thursday on behalf of Coinbase investor Donald Ramsey, who was named individually as the plaintiff alongside all other investors.
Ramsey claims in his complaint that Coinbase made “materially misleading statements” in its offering materials at the time of the IPO. He says the company failed to mention that it needed a “sizable cash injection” and that its platform was susceptible to service-level disruptions that were “increasingly likely to occur as the company scaled its services to a larger user base.”
Ramsey alleges that positive statements that were made about Coinbase leading up to its IPO were potentially misleading or lacked a reasonable basis.
Ramsey further says that in mid-May, the “high-flying promise of Coinbase came to a screaming halt.” According to the complaint, Coinbase announced plans to raise about $1.25 billion via a bond sale on May 17th, and two days later, it revealed technical problems due to network congestion.
Once Coinbase’s need for a cash injection and the platform’s scaling limitations came to light, the stock’s value dropped nearly 10% over two trading sessions.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages.”
By the time Ramsey initiated the class action, COIN had dropped over 45% from its April 14th opening price to a low of $208 per share.
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