A Coinbase shareholder has filed a shareholder derivative complaint against some of the company's executives and board members, alleging they profited from inside information while the company was going public. Chief executive Brian Armstrong and well-known venture capitalists are among the defenders.
A shareholder derivative action is a lawsuit brought against a company on behalf of a shareholder. Coinbase shareholder Adam Grabski filed the lawsuit in Delaware Chancery Court on May 1. Grabski bought Coinbase shares on the first day of the crypto exchange's public listing. According to the abridged complaint issued by the court, the defenders were able to sell $2.9 billion worth of Coinbase stock through a direct listing of the company's stock on the Nasdaq exchange on April 14, 2021. next week.
If the company had had an IPO instead of a direct listing on the exchange, the defenders would not have been able to sell their shares and the equity value would have been diluted. The lawsuit charges that the defenders were able to sell their stock prior to disclosing information they already had that negatively impacted the stock price, which fell more than 37% by May 18 after "compressing the company's revenue margin in the first fiscal quarter." Publicly disclosed the offering of dilutive convertible products. ” According to the lawsuit: “Defendants knew material nonpublic information about the health of the company prior to the multibillion-dollar liquidity event. Delaware law does not allow it, but the trustee, based on such material trade and profit from non-public information.”
The company lost more than $37 billion in market value after the adverse disclosure. However, before the share price fell, "defendants, who represented a majority on the board, sold $2.93 billion of stock," avoiding a loss of more than $1 billion.
The suit charges breach of fiduciary duty and unjust enrichment by plaintiffs, and seeks payment of damages and interest to the company, return of ill-gotten gains to the company, and reimbursement of plaintiffs' costs. Nine people are named in the lawsuit, including Armstrong, former chief product officer Surojit Chatterjee, chief operating officer Emilie Choi, chief financial officer Alesia Hass, chief accounting officer Jennifer Jones, and board members Marc Andreessen, Frederick Ehrsam, Fred Wilson and Kathryn Haun.
A Coinbase spokesperson commented on the case in an email to Cointelegraph: “As the most popular and only publicly traded cryptocurrency exchange in the United States, we have sometimes been the target of frivolous lawsuits. This is one of those baseless claims example of."
The lawsuit, filed on the same day as a class-action lawsuit, alleges violations of Illinois privacy laws in its know-your-customer program. On the bright side, the company launched the Bermuda-based Coinbase International exchange on May 2.
