Coinbase gets sued by customers again By Reuters
Jonathan Stempel
NEW YORK (Reuters) – A federal appeals court on Friday revived a lawsuit by Coinbase (NASDAQ:) customers who accused the largest U.S. cryptocurrency exchange of illegally selling unregistered securities and failing to register as a broker-dealer.
The 2nd U.S. Circuit Court of Appeals in Manhattan ruled that a lower court judge should not have relied on a December 2021 user agreement to determine that Coinbase did not retain ownership of and was not the seller of the 79 tokens traded by customers. said.
In its 3-0 decision, the appeals court said Coinbase had made material changes to its user agreement over time and that the December 2021 version was not “conclusive” when evaluating customers’ legal claims.
Customers in the proposed class action also argued that they never accepted that version and therefore had no bearing on the decision to dismiss the case.
Friday’s decision also upheld the dismissal of claims under the federal Securities Exchange Act seeking to undo some customer trades.
The case returned to U.S. District Judge Paul Engelmayer in Manhattan, who dismissed it in February 2023.
Paul Grewal, Coinbase’s chief legal officer, said in a post on social media platform X that the exchange welcomes the dismissal of some of the claims.
“There is no personal liability for secondary trading of digital assets on exchanges such as Coinbase,” he wrote. “Why? Because the contract is important.”
Jordan Goldstein, the client’s attorney, said he was grateful for the decision and planned to reopen the lawsuit against Coinbase and Coinbase CEO Brian Armstrong.
Engelmayer found that Coinbase was not the seller, saying the exchange had no direct role in the trading, despite promoting the token’s “value proposition” and distributing free tokens to increase trading volume.
On March 27, U.S. District Judge Katherine Polk Failla in Manhattan denied Coinbase’s motion to dismiss a Securities and Exchange Commission (SEC) lawsuit alleging that Coinbase illegally facilitated trading in tokens that should be registered as securities.
This case is Oberlander et al v. Coinbase Global Inc et al., Second U.S. Circuit Court of Appeals, No. 23-184.
