A U.S. federal judge has ruled that Coinbase shareholders may move forward with a narrowed lawsuit against the largest American cryptocurrency exchange. The case accuses Coinbase of hiding key business risks, including the possibility of being sued by the Securities and Exchange Commission (SEC).
The decision came Tuesday night from U.S. District Judge Brian Martinotti in Newark, New Jersey. He rejected Coinbase’s request for a complete dismissal, along with those of its executives and directors. The lawsuit claims that over two years, Coinbase misled investors through regulatory filings, earnings calls, blog posts, and tweets.
Shareholders argue Coinbase falsely suggested it was unlikely the SEC would accuse it of operating an unregistered securities exchange. They also claim the company misrepresented the risk that customers could lose assets if Coinbase filed for bankruptcy.
Judge Martinotti limited some claims but allowed others to proceed. He said shareholders could not rely solely on “group pleading,” where broad statements in corporate documents do not clearly point to an individual defendant. However, where claims named specific defendants, the case remains valid.
The 59-page decision did not clarify which specific statements were dismissed. In a pointed remark, Martinotti noted that “judges are not like pigs, hunting for truffles buried in briefs.”
Coinbase shares have faced sharp volatility during the lawsuit’s timeline. On June 6, 2023, shares dropped 12% after the SEC filed a case alleging Coinbase allowed trading in tokens that should have been registered as securities. A year earlier, on May 11, 2022, shares plunged over 26% after the company issued new disclosures and reported a larger-than-expected revenue decline.
The class action, led by Swedish pension fund Sjunde AP-Fonden, covers investors who bought Coinbase stock between April 14, 2021, and June 5, 2023. Earlier this year, the SEC ended its lawsuit against Coinbase, following the Trump administration’s easing of regulatory oversight for the crypto industry.
The case is titled In re Coinbase Global Inc Securities Litigation, U.S. District Court, District of New Jersey, No. 22-04915.
