Shareholder, Donald Ramsey has filed a securities class action suit as an individual plaintiff as well as on behalf of other victims, against Coinbase, its CEO Brian Armstrong, CLO Paul Grewal, and several other senior executives, along with venture capital backers; for allegedly being ambiguous and deceptive about the financial situation and resilience of the company as a crypto trading platform, before the public listings.
The lawsuit has been filed by the defendant’s law firm Scott + Scott in Northern California District Court on Thursday. Defendant’s lawyers have asserted their claims under the United States Securities Act, with required evidence collected from Coinbase regulatory documents to the Securities and Exchange Commission (SEC), company press releases, analyst reports, and other publicly disclosed information about the exchange.
Ramsey claims that Coinbase and its executives made “materially misleading statements” in their offering documents at the time of public listing and backing Coinbase’s efficiency and resilience with statements that, “lacked a reasonable basis.”
“At the time of the Offering: (1) the Company required a sizeable cash injection; (2) the Company’s platform was susceptible to service-level disruptions, which were increasingly likely to occur as the Company scaled its services to a larger user base.”, the class action suit stated.
Additionally, the lawsuit points out that as soon as the disparities between false advertising and reality became public information, Coinbase’s share price started to fall simultaneously. Referencing mid-May occurrences, when Coinbase admitted the company’s funds requirement and revealed plans to raise over $1.25 billion through a convertible bond sale. The plaintiff highlighted that Coinbase stock saw a steep decline of over 10% in the span of two trading sessions. There are also claims of technical trouble in the Coinbase interface on 19th May, traders tried to withdraw during a bear run in the crypto sphere and experienced delays and lost money.
“Investors were also likely surprised by the timing of the issue, considering that Coinbase just went public in mid-April via a direct listing (which doesn’t involve issuing new shares or raising capital), signaling that it didn’t require cash. So the company’s decision to issue bonds a little over a month later is likely raising some questions.”, the lawsuit mentioned citing a Forbes’ report on the bond sale announcement.
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