Coinbase Directors Faces Insider Trading Lawsuit Despite Internal Clearance of Charges

Coinbase directors are now facing a lawsuit alleging insider trading. The case is set to go on despite an investigation clearing them of any wrongdoing.

Coinbase Directors Hit With Class Action Lawsuit

According to Bloomberg, a Delaware judge has ruled that a shareholder lawsuit alleging insider trading against Coinbase directors can go on. This is despite an investigation clearing them of any wrongdoing.

The lawsuit was filed by a shareholder of Coinbase last year. The shareholder alleged that Coinbase directors, including its CEO Brian Armstrong and Marc Andreessen, a board member, used inside information to avoid losses of over $1 billion.

They are alleged to have sold shares before the company went public last year. The lawsuit alleges that they sold shares worth more than $2.9 billion. Armstrong is alleged to have sold shares worth $291.8 million. Insider trading has been a major talking point in the crypto space. Polymarket recently faced scrutiny on these claims.

This Coinbase lawsuit is related to the decision made by the company to go public through a direct listing rather than through an IPO. This is because, unlike the IPO, there was no lock-up period.

This is the period before trading when existing shareholders would be restricted from selling their shares. In addition, there was no issue of new shares, which would have diluted the shares of existing shareholders.

The attorneys for the directors have denied that their clients engaged in insider trading. They said that the stockholder plaintiff failed to prove that the defendants had non-material information. They also admitted that they did not prove that it was the reason for their decision to sell their shares.

“We are disappointed by the court’s decision and remain committed to fighting these meritless claims in court.”

Committee Presses Harder on Charges Despite Clearance

The case was put on hold while a special committee from Coinbase looked into the lawsuit claims. After 10 months of investigation, the committee recommended that the judge should throw out the case, as the allegations were not strong enough. They also stated that the defendants did not use any confidential information when selling the stocks, as the case had alleged.

The stocks of Coinbase are said to be related to Bitcoin. This means that it is impossible to trade stocks based on any non-public information. However, the litigation committee stated that the directors sold the stocks to increase supply in the company’s direct listing.

“The evidence roundly showed that defendants, including the two biggest stockholders, didn’t want to sell because they were bullish about the company,” Brad Sorrels, an attorney said. “There was really a push and struggle to get the stockholders to participate,” he said.