Coinbase must face customer litigation in New York
Jonathan Stempel
NEW YORK (Reuters) – Coinbase must face lawsuits by customers that accused U.S. cryptocurrency exchanges that are illegally selling without registering as a broker-dealer, a federal judge ruled Friday.
Manhattan US District Judge Paul Engelmeyer rejected Coinbase’s claim. It refused to be recognized as a “statutory seller” under federal securities law because it did not pass the title to the 79 tokens it traded.
The judge cited the accusation that “Coinbase customers will deal with only Coinbase itself,” and required the conclusion that Coinbase is the seller.
Engelmeyer also refused to dismiss claims under the laws of California, Florida and New Jersey, saying that the clients have fully argued that Coinbase is the direct seller of the token.
“Coinbase does not list, provide or sell securities in its exchange,” Coinbase said in a statement. “We look forward to establishing the remaining claims of the District Court.”
The client’s attorney did not immediately respond to requests for comment.
Engelmeyer dismissed the lawsuit in February 2023, but Manhattan’s Second Circuit Court of Appeals revived a portion of it last April. The decision on Friday will allow these parts to proceed. The customer is seeking unspecified damages.
The Securities and Exchange Commission is also suing Coinbase, claiming it illegally allowed the transaction of tokens that should have been registered as securities.
Last month, another Manhattan federal judge put the case on hold, so Coinbase immediately asks if digital token trading is an investment agreement that needs to be regulated as securities, based on the Supreme Court precedent of 1946. It’s done.
In a court filing on January 17, Coinbase told the Court of Appeals that the decision “could clean up the cloud that is currently hanging in the cryptocurrency market.”
The case was found in Underwood et al v Coinbase Global Inc et al, US District Court, Southern District of New York, No. This is 21-08353.
(Reporting by Jonathan Stempel of New York, Editing by Louise Heavens)