A federal judge in New York has reportedly ruled that the leading US-based cryptocurrency exchange, Coinbase, must confront a class action lawsuit. According to a recent report from Reuters, Judge Paul Engelmayer of the Southern District of New York has dismissed Coinbase’s argument that it did not meet the criteria of a “statutory seller” in an attempt to have a lawsuit thrown out. The lawsuit alleges that Coinbase unlawfully sold securities in the form of digital assets to customers without being registered as a broker-dealer.
Engelmayer determined that Coinbase’s assertion was unfounded because the exchange never transferred ownership of the 79 crypto assets traded by customers, emphasizing that “customers on Coinbase transact exclusively with Coinbase itself.” In response, Coinbase stated, “Coinbase does not list, offer, or sell securities on its exchange. We look forward to defending the remaining claims in the district court.”
Moreover, Engelmayer declined to dismiss claims regulated by the laws of California, New Jersey, and Florida, pointing out that the plaintiffs had adequate grounds to argue that Coinbase directly sold the crypto assets. Initially, the lawsuit was dropped in February 2023, but an appeals court reviewed the case and sent certain portions back to the judge.
In June 2023, Coinbase faced a lawsuit from the US Securities and Exchange Commission (SEC) for allegedly breaching securities laws and operating as an unregistered broker-dealer. However, a year later, Coinbase filed its own lawsuit against the regulatory agency and the Federal Deposit Insurance Corporation (FDIC), alleging a deliberate attempt to hinder the digital assets industry. Coinbase expressed at the time, “The SEC has initiated an aggressive enforcement campaign against digital asset companies, which, along with actions by other financial regulators to disconnect crypto firms from banking services, aims to stifle the digital asset sector.”
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