Three individuals standing on behalf of other Coinbase users have filed a class action lawsuit against the crypto exchange and its CEO, Brian Armstrong.
The plaintiffs, Christopher Underwood, Louis Oberlander, and Henry Rodriguez filed the 255-page lawsuit on March 11 in the Southern District Court of New York alleging that Coinbase listed 79 unregistered security tokens on its platform which has caused investors to lose their funds.
Tokens listed include Cardano (ADA), Polkadot (DOT), Shiba Inu (SHIB), Dogecoin (DOGE), and others excluding Bitcoin (BTC), and Ethereum (ETH).
As per the filing:
- Coinbase offers and sells unregistered securities.
- Coinbase exchanges are rule 3b-16(a) systems and therefore are unregistered exchanges under the Exchange Act.
- Coinbase operates as an unregistered broker-dealer on the Coinbase exchanges.
The document outlined the tokens as securities under the Howey test framework which states that there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
The group is seeking damages amounting to $5 million to compensate for their trading losses.
Coinbase Lawsuit Makes Case for Regulatory Clarity
Lawsuits against Coinbase as well as other crypto exchanges are not new. However, most such lawsuits always end up being dismissed by the law court.
One such reason that has led to class action lawsuits like this is the lack of regulatory clarity around the status of certain crypto assets in the United States. Back in October, Silver Golub & Teitell LLP filed a class action against Coinbase on behalf of their clients who traded unregistered crypto assets on the Coinbase platform.
Meanwhile, crypto exchange Ripple and its CEO, Brad Garlinghouse, have been facing a similar legal battle against the United States Securities and Exchange Commission (SEC) since 2020. In November, Garlinghouse revealed that the case is seeing significant progress and is likely to conclude this year.
In the most recent update, as reported by Coinfomania, a document shared on Twitter by attorney Jeremy Hogan, Ripple’s legal adviser, suggests that he expects the lawsuit to end between August 26 and November 18, 2022.
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