Legal Battle Looms for Coinbase Execs
A Coinbase investor has lodged a stockholder derivative lawsuit against several of the firm’s top executives and board members, including CEO Brian Armstrong and prominent venture capitalists. The lawsuit alleges that these individuals reaped financial benefits from insider information during Coinbase’s public listing.
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Adam Grabski, the shareholder, contends that the accused parties sold $2.9 billion in Coinbase shares made accessible via the company's direct listing on the Nasdaq exchange in April 2021 and during the subsequent week. He argues that if Coinbase had opted for an initial public offering instead, the defendants would have been prohibited from selling their shares, and the shareholdings would have been diluted.
The lawsuit claims that the defendants offloaded their shares before revealing information they already possessed, which subsequently had a negative impact on the share price. This resulted in a 37% decline in value by May 18, following the public disclosure of the company's squeezed revenue margins and the release of a dilutive convertible offering.
The complaint accuses the defendants of breaching their fiduciary duty and unjust enrichment and seeks damages payable to the company with interest, the return of improperly obtained gains, and reimbursement for the plaintiff's costs. In response, Coinbase has labeled the claim as “baseless litigation” and an instance of “unwarranted claims.”
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