Coinbase has been accused of downplaying the risks of bankruptcy

The lawsuit states that the platform hid private trading information to compensate for the decline in cryptocurrency prices

19.02.2025 - 15:10

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What’s new? One of the largest crypto exchanges, Coinbase, is facing a shareholder lawsuit alleging that the platform’s management misled investors about bankruptcy risk and violated securities laws. The complaint, filed in New Jersey federal court by Coinbase shareholder Wenduo Guo, alleged that the crypto exchange and its managers failed to disclose that customer assets could be considered part of Coinbase’s bankruptcy estate, making retail customers unsecured creditors.

Cointelegraph’s material

The lawsuit alleged that prior to Coinbase’s public listing in April 2021, at least 75 crypto exchanges went bankrupt, leaving their customers unable to recover their digital assets. Guo added:

“Despite repeated statements by Company management to the contrary, Coinbase was no different with respect to the risk of digital asset loss in the event of bankruptcy.”

What else is known? The complaint also states that Coinbase failed to disclose that it engaged in private trading to offset the decline in cryptocurrency prices. The lawsuit called it “a risky practice involving trading assets using the Company’s money.”

The shareholder also cited a June 2023 Securities and Exchange Commission (SEC) lawsuit against Coinbase, alleging that the company was listing unregistered securities and failed to register with the agency. Guo alleged that these actions resulted in substantial losses, regulatory penalties, lawsuits, and reputational damage to Coinbase.

The plaintiff seeks a jury trial, damages, and corporate governance reforms to prevent similar misconduct.

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