Coinbase (NASDAQ: COIN) is facing a class action lawsuit for the umpteenth time, this time being accused of failing to protect user assets and causing them financial harm by denying them access to their accounts.
The new lawsuit was filed in the Northern District of Georgia by George Kattula, a Coinbase customer who claims he lost thousands of dollars from his Coinbase account after hackers accessed it. Kattula is filing the lawsuit for himself and others similarly situated.
“Contrary to its representations, Coinbase does not properly employ standard practices to keep consumers’ accounts secure,” Kattula says.
Further, the exchange “improperly and unreasonably locks out its consumers from accessing their accounts and funds, either for extended periods of time or permanently.” With digital assets being extremely volatile and some losing up to 40% of their value daily, this can lead to severe financial loss to the users.
Making matters worse, the exchange has a reputation for failing to respond to user complaints in time. This leaves the users in distress as they can’t access their assets and have no way to get assistance.
Kattula further accuses Coinbase of violating securities laws, saying, “Moreover, Coinbase does not disclose that the crypto assets (or “cryptocurrency”) on its platform are securities. Indeed, Coinbase boldly flouts federal and state laws by proclaiming it does not need a registration statement for those securities and by refusing to register as a securities exchange or as a brokerdealer.”
Accusations of Coinbase offering securities aren’t new. In September 2021, SEC Chair Gary Gensler decried the state of securities regulations which have allowed Coinbase to continue operating without a securities license, “even though they have dozens of tokens that might be securities.”
Then, in July, the SEC listed nine tokens that it categorizes as securities that Coinbase offers. This was during its complaint against a former Coinbase manager whom it accused of insider trading. The SEC has yet to formally accuse the exchange of securities violations. But according to Coinbase, no token listed on its platform is a security, end of story.
Meanwhile, Kattula wants the court to grant him $5 million in actual and statutory damages (plus his legal costs), injunctive relief that must include significant improvements to the exchange’s data security systems, and future annual audits.
In addition to Kattula’s lawsuit, Coinbase is facing a ‘gross mismanagement’ lawsuit by a shareholder, a class action lawsuit filed in New Jersey accusing it of misleading its users, and unending claims of insider trading.
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