Coinbase is now under increased scrutiny from regulators, as the business is the subject of multiple lawsuits.
The San Francisco-based cryptocurrency exchange, which is already under investigation by the US Securities and Exchange Commission (SEC), is now facing two fresh legal claims from two different law firms.
On Thursday, Bragar Eagel and Squire, a New York-based law firm, announced that it will sue Coinbase for making false representations about its business operations. Pomerantz LLP has also filed a lawsuit against the exchange, claiming compensation for any losses incurred as a consequence of the defendant's breaches of federal securities laws. This lawsuit was filed to recompense the plaintiffs.
In both complaints, plaintiffs claim that Coinbase made misleading and deceptive assertions about its business, operations, and compliance activities between April 14, 2021, and July 26, 2022. According to the lawsuits, Coinbase failed to disclose that client cryptocurrency was held in escrow at Coinbase, making it part of a bankruptcy estate subject to bankruptcy proceedings in which consumers would be considered as general unsecured creditors of the company.
Furthermore, Coinbase reportedly refused to disclose that it allowed US individuals to trade digital assets that—despite its knowledge and complacency—needed SEC registration as securities. As a result of the aforementioned actions, the lawsuits claim that Coinbase's public claims were always, to a large part, misleading and fraudulent.
Coinbase has already been involved in a number of lawsuits and controversial scenarios. The two new lawsuits came as the SEC investigates Coinbase for allegedly trading unregistered securities. In a related complaint, Ishan Wahi, a former global product manager for Coinbase, is accused of insider trading. Wahi, on the other hand, pleaded not guilty earlier this month in a Manhattan federal courtroom to two charges of wire fraud conspiracy.