NEW YORK–(BUSINESS WIRE)–Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, reminds investors that a class action lawsuit has been filed against Coinbase Global, Inc. (“Coinbase” or the “Company”) (NASDAQ: COIN) in the United States District Court for the District of New Jersey on behalf of all persons and entities who purchased or otherwise acquired Coinbase securities between April 14, 2021 and September 21, 2022, both dates inclusive (the “Class Period”). Investors have until October 3, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
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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.
If you purchased or otherwise acquired Coinbase shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at investigations@bespc.com, telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
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