A shareholder has sued the executives of Bitcoin exchange Coinbase over the company’s 2021 IPO. The lawsuit alleges that mismanagement has disrupted Coinbase’s “flywheel” growth strategy to the detriment of investors. If the lawsuit is successful, CEO Brian Armstrong and other executives may require Coinbase to indemnify him. Here are the details…
Bitcoin exchange Coinbase faces a new lawsuit
Coinbase (COIN) became the first crypto exchange to go public in the US. That’s why last year made history. Now, a shareholder is seeking compensation to the firm for allegedly mismanaging its IPO by stock market executives, according to a complaint filed with a federal court in Delaware. Namely, a Coinbase shareholder sued the company. The documents suggest that Coinbase misrepresented various facts before being listed on the exchange in April 2021.
Because of this, he claims it has come under massive mismanagement. Specifically, the documents complain that Coinbase has “generated a massive influx of listings” through a pre-extensive advertising campaign on its exchange. This resulted in an “unprecedented increase” in listing. It caused service interruptions. This sudden growth disrupted the company’s “flywheel” growth strategy to the detriment of its investors. According to the file, Coinbase’s efforts to increase user numbers “backfired, leaving [the company] and new investors damaged and vulnerable to competition.” So, we can list the items mentioned by the investor as follows:
- 1933 Securities Act violations,
- Violation of fiduciary responsibilities,
- unjust enrichment,
- abuse of control,
- Mismanagement.
Coinbase being asked to compensate him
Today’s filing targets are CEO Brian Armstrong, CFO Alesia Haas and Chief Accountant Jennifer Jones. Additionally, directors Fred Ehrsam, Marc Andreesen and Kathryn Haun, Gokul Rajaram and Fred Wilson are listed as defendants. The lawsuit was filed by shareholder and plaintiff Donald Kocher. While Kocher’s relationship with Coinbase is unclear, executives want Coinbase to compensate him. Apart from that, Coinbase was the focus of the US Securities and Exchange Commission (SEC) for allegedly “insider trading” by some of its executives.
The file was filed with the U.S. District Court for the District of Delaware. As we have also reported as Kriptokoin.com, several lawsuits have been filed against Coinbase over the past year, including in New Jersey and the Northern District of California. General dissatisfaction among investors may result from the decline in the value of the company’s stock. The COIN was priced at $342 when it was listed in April 2021. Now it’s worth $87.68. That is, it has seen its share price drop 61% to date. The SEC investigation could put further downward pressure, according to some, by leading other shareholders to join Donald Kocher in making the claims.
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