A U.S. district judge has dismissed a lawsuit against Coinbase and its CEO Brian Armstrong filed by customers of the crypto exchange. The lawsuit alleges that Coinbase sold 79 crypto tokens that are unregistered securities.
Customer Lawsuit Against Coinbase Dismissed
A proposed class action lawsuit filed in Manhattan by customers of cryptocurrency exchange Coinbase (Nasdaq: COIN) was dismissed with prejudice by U.S. District Judge Paul Engelmayer on Wednesday, meaning they cannot be brought again, Reuters reported.
The lawsuit was filed against Coinbase Global Inc., Coinbase Inc., and CEO Brian Armstrong in March last year. The plaintiffs accused the crypto exchange of selling 79 crypto tokens that were unregistered securities and failing to register as a broker-dealer. The lawsuit seeks damages from the sale or soliciting of the crypto tokens, which the plaintiffs claimed were illegal contracts because Coinbase is not registered with the U.S. Securities and Exchange Commission (SEC).
The plaintiffs claimed that, unlike some crypto trading platforms that only match buyers and sellers, Coinbase acted as an “intermediary,” making it the “actual seller” of the crypto tokens. They alleged that this enabled the Nasdaq-listed crypto exchange to collect transaction fees without adhering to disclosure rules for traditional securities meant to protect investors.
Without declaring whether the 79 crypto tokens are securities, Judge Engelmayer ruled that the customers were unable to prove that the crypto exchange held title to or sold the crypto tokens they traded on the Coinbase and Coinbase Pro platforms.
In addition, the judge ruled that Coinbase had no direct involvement in the transactions, despite allegedly promoting the crypto tokens by highlighting their “purported value proposition” and participating in “airdrops” to increase trading volume.
Coinbase previously said that it received subpoenas from the SEC, noting that the securities regulator is seeking information such as the platform’s listing processes.
The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has confirmed that bitcoin is a commodity but stressed that most other crypto tokens are securities. He has repeatedly urged crypto trading and lending platforms to come in and get registered with the SEC.
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