Coinbase Directors and CEO Facing Insider Trading Lawsuit

The ruling followed an internal investigation clearing the defendants of wrongdoing, Bloomberg News reported Friday (Jan. 30).

The suit was brought by an investor in the cryptocurrency platform in 2023, claiming that directors — including Coinbase CEO Brian Armstrong and venture capitalist Marc Andreessen — used confidential information to avoid more than $1 billion in losses by selling upwards of $2.9 billion of stock when the company went public in 2021. 

According to Bloomberg, Judge Kathaleen St. J. McCormick quashed a motion to dismiss the lawsuit by an internal committee that looked into the insider trading claims, due to what she views as conflicts of one of the members. 

However, the judge indicated that the defendants may ultimately triumph, because the committee’s report “paints a compelling narrative” that bolsters their defense.

The report added that the suit centers around Coinbase’s decision to go public via direct listing rather than an initial public offering (IPO). The direct listing did not involve raising funds through issuing shares, which would dilute holdings or require a lockup period where existing investors would need to wait to trade their shares for a set period, the report added.

Attorneys for the directors denied their clients had been involved in insider trading, and say the shareholder who brought the suit had not shown the defendants possessed relevant nonpublic information and that it led them to sell shares.

“We are disappointed by the court’s decision and remain committed to fighting these meritless claims in court,” Coinbase said in a statement to Bloomberg.

In other Coinbase news, PYMNTS wrote recently about Armstrong’s comments at the World Economic Forum gathering in Davos, where he was part of a panel discussion called “Is Tokenization the Future?”

That discussion, PYMNTS wrote, “made clear that tokenization work has continued steadily in the background, setting the stage for broader embrace.” 

For his part, Armstrong said tokenization addresses structural inefficiencies in the financial system, especially around settlement speed, fees and access.

Tokenization allows for real-time settlement and lower fees, he said, though he stressed that its most powerful impact is expanding participation in investment markets.

Armstrong spotlighted what he called the global “unbrokered” population — roughly 4 billion people without access to investing in high-quality assets — and pointed to stablecoins as the first successful expression of tokenization’s potential.

From his view, stablecoins show how tokenized representations of assets can open the doors to broader participation across borders.