Crypto News : Coinbase faces lawsuit alleging executives enriched themselves by $1B
A Delaware state court has received a lawsuit against Coinbase, a popular cryptocurrency exchange. The suit accuses the company’s top executives of enriching themselves by more than $1 billion by not disclosing negative information about the business before listing its shares on the stock market in April 2021.
Adam Grabski, an investor in Coinbase stock, filed the lawsuit on behalf of all shareholders, naming Coinbase CEO Brian Armstrong, his management team, and prominent investors Marc Andreessen and Fred Wilson as defendants.
The lawsuit alleges that Coinbase did not reveal unfavorable information about its business during its initial public offering (IPO). The company’s insiders allegedly sold their shares just before negative news was released, allowing them to profit millions of dollars.
The suit also claims that the company’s revenue margins were compressed during the first fiscal quarter, and a dilutive convertible offering was issued, causing the share price to drop by over 37% by May 18.
The lawsuit alleges that the defendants had access to non-public information about the company’s health before their liquidity event, and trading on this information is prohibited by Delaware law.
The complaint includes details about the confidential plan of the Coinbase board to go public, which was internally called “Project Fall Fruits.”
Coinbase made its public debut on April 14 through a direct listing of its existing shares, allowing its executives and investors to directly benefit from any stock sales. The company denies all allegations in a statement to The Block, calling the lawsuit “meritless” and “frivolous.”
This news highlights the legal troubles that Coinbase is facing due to allegations of misleading investors. It will be interesting to see how the lawsuit progresses and what implications it may have for the company’s future.