In a recent revelation, more troubles have come up for Coinbase, the world’s second-largest crypto exchange. A lawsuit in the US federal court alleges that the top executive bench of the exchange sold stock using inside information and dodged massive losses.
Sources reveal that Brian Armstrong, Coinbase’s Chief Executive Officer along with board member Marc Andreessen, and other officers have been named and accused of avoiding losses of over $1 billion with the help of inside information to sell stock within days of the platform’s public listing in 2021.
On Monday, the complaint was unsealed in the Delaware Chancery Court, which stated that Coinbase’s board launched a direct listing instead of a more typical initial public offering and rapidly sold off $2.9 billion in stock.
Within five weeks, those shares declined in value by over $1 billion, and Coinbase’s market capitalization plummeted by more than $37 billion.
Sources reveal that Adam Grabski, an investor who filed the lawsuit, alleged that the firm’s management offloaded their stock before “material, negative information that destroyed market optimism from the company’s first quarterly earnings release forward” prompted a decline in the share price.
According to the complaint, as part of the direct listing, Armstrong is said to have sold more than $291 million of Coinbase’s stock. On the other hand, Andreessen’s venture capital firm, Andreessen Horowitz, dumped over $118 million worth of stock during the same period.
As the news of the allegations spread, Coinbase also put forth its stance to the media. In an emailed statement to Bloomberg, Coinbase called the allegations baseless and said the lawsuit is an example of “meritless claims.”
However, this isn’t the only troublesome lawsuit that Coinbase has to deal with. Before this, the firm had been baffled by the US Securities and Exchange Commission (SEC) after it sent a Wells Notice to the firm.
The regulator has accused Coinbase of violating federal securities and for listing and selling unregistered securities. After receiving the notice, the firm executives tried staying optimistic which was also ridiculed by some in the crypto industry for being unrealistic.
As Coinbase’s troubles with the regulator intensified in the absence of sufficient clarity about what followed up, it criticized the regulators. Additionally, the CEO hinted at a potential relocation to the UK. However, last week, the firm retaliated with its lawsuit against the SEC, asking a federal court to compel the SEC to provide clearer guidance on the rules governing the crypto market.