A Coinbase shareholder has filed a shareholder derivative complaint against some of the company's executives and board members, alleging that they profited from inside information during the company's public listing. CEO Brian Armstrong and well-known venture capitalists are among those charged.
A shareholder derivative complaint is a lawsuit filed against a company on behalf of its shareholders. Coinbase shareholder Adam Grabski archived the lawsuit in the Delaware Court of Chancery on May 1. Grabski bought Coinbase shares on the first day of the crypto exchange's public listing.
According to a redacted version of the complaint released by the court, the defendants were able to sell $2.9 billion worth of Coinbase shares that were made available to the public through a direct listing of the company's shares on the Nasdaq exchange on Sept. 14. April 2021, and in the week that followed.
A Fascinating Lawsuit Looks At The Coinbase Board's Confidential Plan To Go Public Two Years Ago> The process was dubbed the "Fall Fruits Project" internally.
The project was indeed, er, fruitful. Look who got rich:$ CURRENCY pic.twitter.com/FUGT2g5ZEx
โJim Edwards (@Jim_Edwards) May 2, 2023
If the company had made an initial public offering instead of going public directly, the defendants would have been prevented from selling their shares and the value of the holdings would have been diluted.
The lawsuit alleges that the defendants were able to sell their shares before disclosing information they already had and that it negatively affected the share price, which fell more than 37% on May 18, after โthe compression of the income margins of the Company during the first fiscal quarter. and the issuance of a dilutive convertible offer were publicly disclosed.โ According to the suit:
โDefendants were privy to material, non-public information about the Company's health prior to its multi-billion dollar liquidity event. [โฆ] However, Delaware law does not allow [โฆ] fiduciaries who trade on the basis of and benefit from such material non-public informationโ.
The company lost more than $37 billion in market value after the unfavorable disclosures. However, โDefendants, comprising a majority of the Board, sold $2.93 billion worth of sharesโ before the price fell, avoiding a loss of more than $1 billion for themselves.
The lawsuit charges breach of fiduciary duty and unjust enrichment and demands payment of damages to the company with interest, return of ill-gotten gains to the company, and reimbursement of plaintiff's expenses.
Related: Coinbase Could Face SEC Enforcement Action For โPotential Securities Law Violationsโ
The suit names nine people, including CEO Brian 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 Andreesen, Frederick Ersham, Fred Wilson, and Kathryn Haun.
A Coinbase spokesperson commented on the case in an email to Cointelegraph: โAs the most popular and only publicly traded crypto exchange in the US, we are sometimes the subject of frivolous litigation. This is an example of one of those claims without merit."
this suit showed up the same day as a class action lawsuit for alleged violations of Illinois privacy laws in its Know Your Customer proceeding. On the positive side, the company launched the Bermuda-based company Coinbase International Exchange on May 2.
Magazine: What happened to EOS? Community shoots for unlikely comeback
Post navigation
