Leading American cryptocurrency exchange Coinbase has been hit with another lawsuit. This time, a group of investors claimed that the company made false and misleading statements, which caused its stock price (COIN) to plummet heavily between April 14, 2021, and July 2022 (Class Period).
Coinbase went public on April 14, 2021, through a direct listing on Nasdaq. The company’s stock started trading around $400 but closed the first trading day at $328. Since then, COIN has been on a downward spiral and is currently trading at $88.90, a 74% decline from its all-time high (ATH).
The class action filed in the United States District Court for the District of New Jersey claimed that Coinbase “made materially false and misleading statements regarding the Company’s business, operations, and compliance policies” since it went public.
According to Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, long-term stockholders and investors who suffered a loss during the “Class Period” can join the suit with no cost or obligation.
The class action announcement highlighted two major events that negatively impacted COIN’s price. The first was the company’s controversial risk disclosure, while the second was the SEC probe.
On May 10, 2022, Coinbase released its Q1 earnings report, revealing that it lost $430 million between January and April. While the numbers were worse than expected, a risk disclosure in the earnings report caused an uproar among the exchange’s customers.
According to the disclosure filing with the United States Securities and Exchange Commission (SEC), Coinbase customers might lose access to crypto assets stored on the exchange if the company ever files for bankruptcy like other crypto firms that have gone bankrupt over the past few months.
This is because Coinbase users could be treated as “general unsecured creditors,” so they would be the last to make claims. Following the disclosure, the firm’s CEO Brian Armstrong apologized to customers, noting that the disclosure was something the exchange should have done earlier. Nonetheless, COIN plummeted 26.4% to an all-time low (ATL) on that day.