Vernon told Coinbase that the $8.2 million represented either a portion of the revenues Cryptsy had generated from its business or represented Bitcoin that Mr. Vernon himself personally owned. Despite Mr. Vernon’s assertions of business revenue and personal ownership, Coinbase — as a Money Services Business regulated under the FinCEN division of the U.S. Treasury Department — was required to reasonably verify those facts. The lawsuit asserts that Mr. Vernon’s claims were untrue, and Coinbase failed to satisfy its regulatory requirements or perform any reasonable investigation into the suspicious activity in Mr. Vernon’s and Cryptsy’s Coinbase accounts. Although the exact amount remains undetermined, the lawsuit estimates that the value of the digital funds laundered through Coinbase exceeds $8,200,000.00. Mr.

Coinbase class action lawsuit

Geller by calling 800/449-4900 or via e-mail at [email protected]. Lead plaintiff motions for the Coinbase class action lawsuit must be filed with the court no later than September 20, 2021.

CASE ALLEGATIONS: The Coinbase class action lawsuit alleges that Coinbase’s offering materials were false and misleading and omitted to state that, at the time of the Offering: (i) Coinbase required a sizeable cash injection; (ii) Coinbase’s platform was susceptible to service-level disruptions, which were increasingly likely to occur as Coinbase scaled its services to a larger user base; and (iii) as a result, defendants’ positive statements about Coinbase’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

On May 17, 2021, Coinbase revealed plans to raise about $1.25 billion via a convertible bond sale (the “Bond Offering”).

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Coinbase insiders tipped off others in advance of the earlier-than-scheduled listing, which produced a huge financial windfall for those who purchased Bitcoin Cash before it was available on GDAX. Notwithstanding its claim that it would conduct a thorough internal investigation into whether any of its employees or staff members had violated insider trading rules, Coinbase has not made public the full results of its investigation into this suspect chain of events.

  • Undelivered/Unclaimed Funds: Several Coinbase users have complained of sending cryptocurrency to non-Coinbase users via e-mail, having those deliveries either fail or wind up going unclaimed, but not being advised by Coinbase that the transmittals did not reach their intended destinations and not having the undelivered/unclaimed cryptocurrency returned to them.
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    As Silver Miller Co-Founder David Silver was quoted saying at the time: “Coinbase does not want to be exposed in open court about what its business practices were in 2013-2015. Coinbase had a fiduciary duty to know its customers and report suspicious transactions.
    Simply stated, they chose not to do that. We look forward to litigating these claims.”

    In addition to wrongdoing alleged to have occurred at Coinbase in 2013-2015, Silver Miller is also actively involved in investigating several ongoing problems and suspicious activities occurring at Coinbase in recent weeks/months, including the following:

    • Insider Trading: In August 2017, bitcoin “forked” and created a new cryptocurrency called Bitcoin Cash. When it was created, the value of Bitcoin Cash was relatively low; and Coinbase did not list Bitcoin Cash on its trading platform (GDAX).

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    “The design and nature of this business scheme exploits and deceives consumers in two ways,” the lawsuit claims. “First, Coinbase is providing the appearance of account security through a program that does not appear to be operational. Second, Coinbase is incentivised to leave open security vulnerabilities in order to force clients into a subscription program that costs $29.99 per month in order to have heightened security and account protection.”

    The lawsuit goes on to explain how Coinbase forgoes cold wallet ‘industry standards’ and instigates a ‘cooldown period’ for transfers to new addresses, which in turn provide easier access for hackers.

    “Consumers are then left at the mercy of hackers and other nefarious parties who exploit these vulnerabilities to drain victims accounts in an instant.

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    The suit uses a number of criteria to distinguish the assets including in the suit from those which are not, and addresses each of the 79 listed assets individually. For example, most of the assets complained of in the suit are ones with little or no utility and the trading of which is focused on investment profit, an argument which speaks directly to the limbs of the Howey test for securities.
    Similarly, the suit argues that any token which was issued via ICO to be a security, a line the SEC has previously argued with success in its action against Telegram.

    The plaintiffs seek damages and orders preventing Coinbase from continuing its ‘illegal practices.’

    The lawsuit is part of an increase in scrutiny over rogue exchanges across the board, from regulators beginning enforcement to private citizens taking action.

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    SEC Chair Gary Gensler sent out a not-so-subtle warning to Coinbase last year, urging the exchange to register themselves with the SEC and remarking that Coinbase “have dozens of tokens that may be securities.”

    Intentional or not, this lawsuit seems a natural consequence of Gensler’s view and the increase in action taken by regulators to ensure that the digital asset industry is compliant.

    Already facing a multitude of lawsuits over alleged market manipulation and insider trading, Coinbase’s woes seem destined to increase as the year progresses. Dr. Wright promised to launch “the biggest legal case in human history” against Coinbase later this year, having already instructed his lawyers to send out letters to Coinbase and other exchanges warning them over their use of the Bitcoin name to promote unrelated products.
    Dr.

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    Vernon is believed to have absconded with those funds when he abandoned Cryptsy and fled to China in late-2015.

    As stated in the lawsuit, the class of victims pursuing relief includes: “All CRYPTSY account owners who: (1) deposited Bitcoins, alternative cryptocurrencies, or any other form of monies or currency at CRYPTSY, (2) had such currency liquidated by VERNON and CRYPTSY through COINBASE, and (3) have been denied access to their accounts and funds between May 22, 2014 and the present date.” The lawsuit asserts against Coinbase claims for aiding and abetting breach of fiduciary duty, aiding and abetting conversion, negligence, and unjust enrichment.

    In June 2017, we defeated Coinbase’s efforts to have the lawsuit shifted to a private arbitration forum rather than the public forum that the U.S. courts provide.

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    Three Coinbase customers have brought a class action lawsuit against crypto exchange Coinbase for allegedly selling 79 unregistered securities to US customers. Louis Oberlander, Henry Rodriguez, and Christopher Underwood allege that a wide range of Coinbase’s listings are illegal, including decentralized exchanges, lending protocols, oracles, metaverses, and meme coins.

    The plaintiffs wish to “recover damages, consideration paid for tokens, and trading fees, together with interest thereon, as well as attorneys’ fees and costs, to the fullest extent permitted by law.” They believe Coinbase is liable for more than $5 million in damages.

    The lawsuit mentions the US Securities and Exchange Commission (SEC) and its stance that crypto lacks proper investor protections, but it’s unclear if the SEC actually cares about Coinbase’s listings.

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    Instead, Coinbase has allegedly kept those unclaimed funds for itself, which many critics believe represents an unlawful or unfair business practice.

  • Platform Breakdowns: Delayed trades and failed purchase orders can cause accountholders not only undue worry but also significant investment loss. Because cryptocurrency prices fluctuate so frequently, timeliness of executing trading orders is key for a well-run exchange; and any lack of timeliness can prove devastating to an investor.
  • Unexplained and Unwarranted Account Freezes/Inability to Access an Account: Many Coinbase customers have reported an inability to access their accounts despite complying with all Coinbase security protocols.
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    It was charged with reckless, false, misleading, and inaccurate reporting and wash trading.

  • It has repeatedly ignored customer pleas for help when their accounts are hacked or otherwise taken over. CNBC interviewed Coinbase users who were victims of this.
  • Earlier this year, it had to quickly backtrack on launching its LEND product when the SEC threatened action against it.

    This caused Coinbase CEO Brian Armstrong to launch a tirade of conspiratorial accusations against the SEC on social media platform Twitter.

  • Coinbase also participated in the delisting attack against Bitcoin SV. Dr. Craig Wright (aka Satoshi Nakamoto) has vowed legal action against the exchange if the situation is not remedied in the immediate future.
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