Leading crypto exchange Coinbase finds itself in new trouble as a lawsuit claims that its top leadership sold stock using inside information and dodged massive losses.
Coinbase’s Chief Executive Officer Brian Armstrong, board member Marc Andreessen, and other officers are being accused of avoiding losses of over $1 billion with the help of inside information to sell stock within days of the platform’s public listing in 2021.
The investor Adam Grabski, who filed the lawsuit, claims that the firm’s management offloaded their stock before “material, negative information that destroyed market optimism from the company’s first quarterly earnings release forward” prompted a decline in the share price .The complaint was unsealed on Monday in Delaware Chancery Court, which declared that Coinbase’s board launched a direct listing instead of a more typical initial public offering and rapidly sold off $2.9 billion in stock.
“Within five weeks, those shares declined in value by over $1 billion, and Coinbase’s market capitalization plummeted by more than $37 billion.”
As part of the direct listing, Armstrong is said to have sold more than $291 million of Coinbase stock.Andreessen’s venture capital firm, Andreessen Horowitz, on the other hand, dumped over $118 million worth of the stock during the same period, according to the complaint. In an emailed statement to a prominent agency Coinbase said the lawsuit is an example of “meritless claims.” The lawsuit emerged a month after the US Securities and Exchange Commission (SEC) sent a Wells Notice to Coinbase for listing unregistered securities.
Tensions have been brewing up with the regulator for quite some time. The NASDAQ-listed firm retaliated with its own lawsuit against the SEC, asking a federal court to compel the SEC to provide clearer guidance on the rules governing the crypto market.