Coinbase Executives Slammed With Lawsuit Over Insider Trading Violations to Avert Colossal Loss Worth $1 Billion
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Nine Coinbase executives and board members are facing a lawsuit from a stockholder over the alleged use of inside information to dump the company’s shares and avoid a $1 billion loss just before the crypto exchange stocks went public.
The plaintiff alleges that the defendants knew the company would miss its financial targets.
Exclusive Insight: Executives and Board Members Sold Shares Ahead of Bearish Fall
According to a recent Bloomberg report, top executives and board members of Coinbase, the largest US-based crypto exchange, have been sued by stockholder Adam Grabski on May 1st in the Delaware Chancery Court.
The lawsuit entails an alleged use of inside information to avoid a $1 billion loss from Coinbase stock sales.
The exchange stock investor Adam Grabski highlighted the platform’s CEO Brian Armstrong, the board member Marc Andreessen, and other top executives as notable names that avoided losses by selling shares using insider trade information.
The lawsuit alleges that the named executives violated insider trading information to dump Coinbase shares within a few days of the exchange’s public listing on the United States stock market in April 2021.
According to a Securities filing report, Coinbase CEO Armstrong sold a whopping $291.8 million worth of the platform’s shares a month after the stock was listed in the U.S. market.
Within the first month after listing on the NYSE, insiders cashed out billions of dollars worth of @Coinbase $COIN stock
Among them, was $291 million from @Coinbase founder and CEO @brian_armstrong $COIN stock is down 88% since the day it went public pic.twitter.com/qfVZ1ywpeT
— Pledditor (@Pledditor) May 2, 2023
Other notable mentions, such as the chief operating officer Emeli Choi, chief financial officer Alesia Haas, and the chief accounting officer, sold $219.7, $99.3 million, and $43.4 million, respectively, in the same period.
Furthermore, Fred Ehrsam, an ex-executive member of Coinbase, sold $219.5 million in shares, and board members Marc Andreessen and Kathryn Haus sold $118.7 million and $73.5 million, respectively.
The former chief product officer also sold $61.9 million of Coinbase stocks.
However, the biggest sale was executed by Fred Wilson, a Coinbase investor who held 7% worth of shares before the advent of the direct listing in 2021.
All the stocks totaled $2.9 billion and were sold within a month of Coinbase’s stock listing.
According to the litigation unsealed on Monday in Delaware Chancery Court, the crypto exchange firm deployed a direct listing instead of the conventional initial public offering and swiftly sold $2.9 billion worth of shares.
This was before the Coinbase management team’s revelation that the company’s quarterly earnings showed its market optimism had been shattered by negative information.
In simpler words, the litigation alleges the executives and board members knew bad market news was coming and proceeded to sell their stock within a month of listing to avert losses.
As anticipated, the company’s shares declined by over $1 billion, and a $37 million steep bearish fall of Coinbase’s overall market capitalization within five weeks, Adam claimed.
The stockholder investors have held Coinbase shares since April 2021 and expressed disappointment over the sudden plummet, which could’ve been avoided if transparency had been implemented.
NASDAQ Analysis: $COIN Stock Price Impact
On May 1st, when the Adam Grabski lawsuit was unsealed in Delaware Chancery Court, the $COIN stock price hit an 8% downtrend and traded at $40.29 per share.
However, the last 24 hours have shown a significant gain of a 2.35% price increase, with the token now trading at $51.32.
The crypto exchange stock valuation is still down to 86.53% of its all-time high price of $319.42 per share recorded on October 1st, 2021.
The major fallout plummet from its all-time high valuation can be attributed to a spate of lawsuits from regulations over securities traded, the federal reserve’s new interest rates hike, and many more.
Currently navigating the Adam Grabski lawsuit, the exchange stock valuation may record significant gains if found not guilty.
However, an otherwise case will trigger a further bearish fall bound to cause losses to stockholders.
What Is Next For Coinbase?
Bloomberg report states that Coinbase Inc. dismissed the lawsuit via email and termed the litigation “frivolous” and an “example of one of those meritless claims.”
Yet to move on from Adam Grabski’s suit, the crypto exchange is locked in a new regulatory battle with the Security and Exchange Commission (SEC), a prestigious United States crypto framework authority.
Coinbase received a “Wells Notice” from the regulatory body on March 23rd, which suggested an enforcement action is likely on its way.
In response, the platform asked for intervention as it seeks clarity from SEC on its petition against securities traded.
The recent lawsuits against Coinbase have made analysts skeptical about $COIN’s stock price potential plummeting.
