Insider Trading, Misused Biometric Data Scandal Rocks Coinbase: Executives Accused of Dodging $1 Billion Loss
Coinbase dealing dirty?
Picture this: you’re one of the executives at Coinbase, a leading cryptocurrency platform, with inside information that could make or break the company’s share price. What do you do? Well, according to a recent Bloomberg report, some executives at Coinbase allegedly chose to use that information to avoid more than $1 billion in losses by selling stock within days of the platform’s public listing two years ago.
Imagine the shockwaves this news sent through the crypto community! A lawsuit filed by an investor accuses Coinbase CEO Brian Armstrong, board member Marc Andreessen, and other officers of knowing about the bad news that would eventually send the share price tumbling. The investor claims that these executives sold their shares before the news became public, which, if proven true, would constitute insider trading.
From IPO to Direct Listing: A Strategic Move or a Sneaky Trick?
Now, here’s where things get even more interesting. The lawsuit alleges that Coinbase’s board of directors used a direct listing instead of a traditional initial public offering (IPO) to sell off $2.9 billion in company stock before revealing the negative information that caused the company’s share price to plummet. This move has raised more than a few eyebrows, considering the growing popularity of direct listings among tech companies in recent years.
Direct listings allow companies to bypass the traditional IPO process and sell shares directly to the public. However, critics argue that this strategy can limit the amount of information disclosed to investors prior to the sale of shares. In the case of Coinbase, the lawsuit alleges that the board used the direct listing strategy to quickly sell off company stock before negative information was publicly disclosed. Talk about a plot twist!
Executives Deny Accusations: A Battle of “He Said, She Said”
Adam Grabski, the investor who filed the lawsuit, claims that the executives sold their shares within days of Coinbase’s public listing in 2019 before the company announced a significant decline in trading volume and revenue. He alleges that this was insider trading and led to losses for investors who purchased shares after the executives had sold theirs.
According to the complaint, Armstrong sold $291.8 million of Coinbase stock as part of the direct listing, while Andreessen’s venture capital firm, Andreessen Horowitz, sold $118.6 million worth of the stock. Grabski alleges that within five weeks, the executives’ shares declined in value by over $1 billion, leading to a significant drop in Coinbase’s market capitalization.
Of course, the accused executives are not taking these allegations lying down. Coinbase has reportedly responded to the lawsuit in an email statement, calling it “frivolous” and “meritless” and claiming that the company is often the target of such litigation. They say there are always two sides to a story, and this one is no exception!
The Stakes are High: What Could Happen if the Allegations Are True?
If the allegations are proven true, the consequences could be dire for the executives involved. Fines, criminal charges, and even imprisonment could be on the table. The lawsuit is currently seeking damages on behalf of investors who have suffered losses as a result of the alleged insider trading. As the crypto world watches with bated breath, only time will tell what the outcome of this high-stakes battle will be.
Coinbase is not new to drama as there has already been a court case involving another high-level member and insider trading. With multiple crypto companies falling left and right one may wonder if Coinbase will be the next one to fall and if Coinbase is found guilty of wrongdoing will that be the end of crypto in general or will another rise in their place to continue the cycle? These are thoughts many think of when it comes to crypto and also why certain members of the United States government are so adamant about regulation and control.
Coinbase Faces Lawsuit Over Biometric Data Misuse
Imagine being a Coinbase user and discovering that your facial and fingerprint recognition data has been improperly collected, stored, and shared with other companies. That’s precisely what Michael Massel, the plaintiff in a new lawsuit against the leading U.S. crypto exchange, alleges.
The case, filed in a District Court in California, accuses Coinbase of violating Illinois’ Biometric Information Privacy Act (BIPA) through its Know Your Customer (KYC) practices. Massel is seeking $5,000 in damages for each “intentional and reckless violation” of the Act, plus an additional $1,000 for every other violation his legal team can uncover.
According to BIPA, companies wishing to collect biometric data must inform individuals in writing, including the specific purpose and duration for which the data will be stored. Additionally, they need written consent from the customer and must publish “publicly-available written retention schedules and guidelines for permanently destroying biometric identifiers and biometric information.” Coinbase is accused of not following these protocols when collecting customers’ biometric data.
Massel’s lawsuit also claims that Coinbase wrongfully profits from the collected data, using it to “further enhance Coinbase and its online ‘app-based’ platform.” Furthermore, the suit alleges that Coinbase disclosed the biometric data to several third parties, including Jumio Corporation, Onfido, Inc., Au10tix LTD, Solaris AG, and Liquid Co., Ltd.
While Coinbase has yet to comment on the lawsuit, it’s worth noting that this isn’t the company’s only legal battle. Coinbase is also facing pressure from U.S. regulators pursuing a “regulation-by-enforcement strategy” in the crypto industry. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have been serving lawsuits and legal threats rather than drafting new guidelines for the rapidly-evolving sector.
As a result, Coinbase — a publicly traded U.S. company — seems to be seeking friendlier shores. Last month, the exchange announced that it had received a license to operate in Bermuda and is in talks with the Financial Services Regulatory Authority (FRSA) in the Abu Dhabi Global Market (ADGM) — a crypto-friendly free economic zone in the UAE — about potentially opening a regulated exchange there.
So, what does this mean for Coinbase users and the broader crypto community? Well, only time will tell how these legal challenges will unfold. But one thing is for sure: the Wild West days of the crypto world may be coming to an end, as regulators and lawmakers worldwide are starting to pay closer attention to the industry’s practices.