Coinbase Class Action Revived: Court Allows Bankruptcy Risk Disclosures to Proceed

A federal court in New York has allowed part of an investor class action lawsuit against Coinbase (COIN) to proceed, reviving claims that the company concealed potential bankruptcy risks and the possibility of a U.S. Securities and Exchange Commission (SEC) investigation.

The class action was originally filed in August 2022, during significant market volatility, with investors accusing Coinbase of failing to disclose that customer assets could be at risk in the event of a bankruptcy.

Coinbase had sought to dismiss the case, arguing its disclosures were adequate and the claims lacked merit. However, the court found that the plaintiffs had sufficiently alleged that the company's statements were misleading, allowing the case to proceed on those specific claims.

The decision means that the case will now enter the discovery phase, where both parties will exchange evidence and depositions. This process could uncover internal communications or documents that shed light on what Coinbase executives knew about the risks and when they knew it.