Coinbase has been accused of not doing due diligence after users lost large sums on an altcoin project.
Coinbase faces second class action lawsuit over this altcoin
Coinbase is allegedly negligent in listing the TerraUSD stablecoin. A class action lawsuit is being filed against the exchange on the grounds that it did not act transparently in its financial relationship with Terraform Labs. Coinbase is now preparing its second class action lawsuit against it. A lawsuit was filed last month regarding the removal of GYEN in November.
Thursday’s lawsuit opens after Coinbase failed to do due diligence against Terraform Labs before listing TerraUSD. It also claims that it was negligent in misrepresenting TerraUSD’s risk as an algorithmic stablecoin. The lawsuit compares information on stablecoins provided by Robinhood, Gemini, and Kraken exchanges with that of Coinbase. Accusations against the exchange include:
Rather than explaining the nature of TerraUSD as unsecured, algorithmically controlled and highly risky, Coinbase has recognized it as another stable currency.
Coinbase’s investment arms are also being sued
The lawsuit also alleges that Coinbase Ventures, the company’s investment arm, is one of Terraform Labs’ largest funders, which is an additional motivation for the company not to disclose TerraUSD’s volatility.
The plaintiffs and classes in the lawsuit are represented by law firms Milberg Coleman Bryson Phillips Grossman and Erickson Kramer Osborne. As we reported on cryptokoin.com , the latter company also represented plaintiffs in an open lawsuit against Coinbase and GMO-Z.com Trust on May 13 regarding the collapse of GYEN’s Japanese yen-pegged stablecoin in November.
The value of GYEN dropped to zero a week after it was listed on Coinbase. It caused the exchange to freeze the accounts of some users. Some users also lost money during the incident – “countless millions”, according to the lawsuit. The lawsuit alleges that GMO-Z.com failed to fulfill its duties to plaintiffs and the class, starting with the stablecoin’s design. Coinbase is guilty of negligent misrepresentation and failure to exercise reasonable care in listing GYEN despite a reasonably foreseeable risk of link breakage.
Stock market signals more layoffs
Coinbase said on Tuesday it is laying off about one-fifth of its workforce. Coinbase CEO Brian Armstrong said in an email to employees that the company will cut 18 percent of its workforce. He said the cuts would affect about 1,100 of its roughly 6,100 employees. However, at least 14 weeks of severance pay is given.
The news came after crypto bank Celsius temporarily suspended operations late Sunday night. In his email, Armstrong suggested that the market will stay that way for a while. Referring to the period in 2018, when many cryptocurrencies lost value before recovering, he said:
We expect a recession to lead to another crypto winter. This period will be long.
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