Three individuals filed a proposed class action in the Southern District Court of New York against Coinbase, alleging that they are operating as an unregistered securities exchange .
According to the lawsuit, there are almost 79 tokens listed in the US-based cryptocurrency exchange that could violate state and federal laws. In addition, Christopher Underwood, Louis Oberlander, and Henry Rodriguez, the plaintiffs, claim that buyers were not properly warned of the risk involved when acquiring these assets.
The 255-page document elaborates that each token qualifies as being a security under the Howey test, which refers to them as ‘investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.’ Brian Armstrong, Coinbase, and Coinbase Global are named as defendants in the lawsuit.
“The case is not much of a surprise. After all, the SEC has signalled that it intends to pursue investigations or actions against crypto-exchanges,” Philip Moustakis, the counsel at Seward & Kissel, commented on the legal case. He added: “While the tests to determine whether a token is a security […] are well established, the analysis depends on facts and circumstances and different evaluators weigh certain factors more than others, so it can yield different outcomes depending on one’s point of view.”
Coinbase has not issued a statement concerning this case as of press time.
Coinbase Q4 2021 Revenues
Last month, the US-listed crypto exchange reported that it generated $2.5 billion in revenue in the fourth quarter of 2021. It was a substantial gain from the previous quarter’s $1.2 billion and exceeded analyst estimation of $2 billion.
The adjusted earnings per share came in at $3.32, compared to the street estimates of $1.94.
The revenue was supported by a significant increase in trading volume on the cryptocurrency exchange. In the reported Q4, ending on December 31, the trading volume soared to $547 billion, increasing from $327 billion in the third quarter and $89 billion in the same quarter of the previous year.
