Judge Rules $29 Billion Insider Trading Lawsuit Involving Coinbase CEO and Other Directors to Proceed

Odaily News A judge in Delaware, USA, has ruled that a shareholder lawsuit alleging insider trading by multiple directors of Coinbase Global Inc., including venture capitalist Marc Andreessen, can proceed for now. This comes after an internal investigation previously concluded that the defendants had not engaged in any wrongdoing.

Shareholders of the crypto platform filed the lawsuit in 2023, accusing directors, including CEO Brian Armstrong, of using confidential information to sell over $29 billion worth of stock during the company's 2021 public listing, thereby avoiding losses exceeding $10 billion. According to the shareholder complaint, Armstrong, who has led Coinbase since its founding in 2012, sold $291.8 million worth of stock.

Judge Kathaleen St. J. McCormick on Friday denied a motion to dismiss the lawsuit filed by the internal committee that investigated the matter, citing a conflict of interest involving one of the committee members. However, Judge McCormick noted that the directors might ultimately prevail, as the special litigation committee's report "paints a compelling narrative" supporting their defense.

The derivative lawsuit filed by shareholders against Armstrong, Andreessen, and other executives centers on Coinbase's choice to go public via a direct listing rather than an initial public offering (IPO). A direct listing does not involve issuing new shares to raise capital, thus avoiding dilution of existing holdings and eliminating the need for a lock-up period that typically restricts existing investors from trading their shares for a set duration.

The complaint alleges that Andreessen, who has served on Coinbase's board since 2020, sold $118.7 million worth of stock in the direct listing through his Silicon Valley venture capital firm, Andreessen Horowitz. The shareholders' lawyers accuse the directors of selling shares to avoid losses based on confidential valuation information indicating the company's stock was overvalued.

Lawyers for the directors deny that their clients engaged in insider trading. They argue that the shareholder plaintiffs failed to provide evidence proving the defendants possessed material non-public information and that such information was the reason for their stock sales. (Bloomberg)