Coinbase sued for selling Solana, Polygon and Uniswap

Coinbase and its CEO, Brian Armstrong, are facing a new class-action lawsuit filed in the United States District Court for the Northern District of California, San Francisco Division.

The lawsuit alleges that Coinbase’s business model is illegal, and that the company knowingly deceived investors into buying securities, which, according to the complaint, violates state securities laws.

The lawsuit was filed on behalf of plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard from California and Florida. They claim that Coinbase’s digital asset sales have violated securities regulations since the company’s inception. Specifically, the suit identifies tokens like Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM) as unregistered securities.

The complainants argue that Coinbase’s own user agreement implicitly acknowledges its role as a “Securities Broker,” making the digital assets sold by the exchange investment contracts. They also claim that Coinbase Prime brokerage operates as a securities broker. The plaintiffs are seeking full rescission of the purchases, statutory damages under state law, and injunctive relief through a jury trial.

This lawsuit mirrors similar claims in other cases where Coinbase has faced accusations of selling unregistered securities. Coinbase has previously maintained that secondary sales of crypto assets do not meet the criteria for securities transactions, disputing the applicability of securities laws to its operations.

The lawsuit comes amidst Coinbase’s ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), which also questions whether tokens sold on the exchange should be considered securities. It alleges that the largest U.S. cryptocurrency exchange has violated securities laws by facilitating the trading of at least 13 crypto tokens that should have been registered as securities.

In response to a judge’s decision allowing the SEC case to proceed, Coinbase recently filed an interlocutory appeal. Moreover, crypto attorney John Deaton filed an amicus brief on behalf of over 4,700 Coinbase customers.

Despite these legal challenges, Coinbase reported a robust financial rebound in the first quarter of 2024, driven by improved market performance and the launch of spot Bitcoin exchange-traded funds (ETFs). The exchange posted $1.6 billion in total revenue and $1.2 billion in net income, achieving $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.