Coinbase made history in 2021 when it became the first crypto exchange to go public in the United States. Now, a Coinbase shareholder is seeking damages from its executives for allegedly mismanaging its public listing, according to the complaint filed in the Delaware federal district court.
The complaint, filed by shareholder Donald Kocher on behalf of Coinbase, alleges that the company’s leadership made false and misleading statements in the firm’s public filings to the Securities and Exchange Commission ahead of its direct listing in April 2021. Those statements allowed investors to purchase company shares on the Nasdaq stock exchange without the involvement of intermediaries like Wall Street investment banks, he claims.
“Our unique approach draws retail users, institutions and ecosystem partners to our platform, creating a powerful flywheel: retail users and institutions store assets and drive liquidity, enabling us to expand the depth and breadth of crypto assets that we offer, and launch new, innovative products and services that attract new customers,” Coinbase said in its SEC filings.
The increased volume on Coinbase disturbed its “flywheel” cycle, the suit claims, as well as causing system disruptions and delays due to increased demand. The complaint references six specific disruptions in 2019 and 12 in 2020 which occurred prior to Coinbase going public in 2021.
Kocher named nine former and current Coinbase officers as defendants in the derivative suit, including CEO Brian Armstrong, Chief Financial Officer Alesia Haas and board member Marc Andreessen of violating federal securities law, abusing their power, causing financial harm to the firm and “gross mismanagement.”
“Coinbase’s business, goodwill and reputation with its business partners, regulators and shareholders have been gravely impaired,” said the complaint.