On Thursday, cryptocurrency exchange Coinbase found itself in legal hot water when a class-action lawsuit was filed against the company. According to the lawsuit, the trading platform had been negligent as it had listed the TerraUSD stablecoin and also alleged that the company had not done a full disclosure of the relationship it had with the company behind the stablecoin i.e. Terraform Labs. This is the second lawsuit to have been filed against the exchange recently. Last month, Coinbase had another lawsuit filed against it due to the GYEN stablecoin that was depegged in November last year.
The Latest Lawsuit Details
As per the lawsuit filed against Coinbase on Thursday, the company had been negligent because it had not done proper due diligence where Terraform Labs was concerned and had listed their UST stablecoin. The platform was accused of listing the UST stablecoin as an algorithmic one, thereby misrepresenting its risk.
The lawsuit compared the information provided by different crypto exchanges about stablecoins, which includes Gemini, Kraken and Robinhood with the information provided by Coinbase. It was concluded that Coinbase had just passed off the TerraUSD coin as just another stablecoin, rather than disclosing that it was highly risky, algorithm controlled and uncollateralized for that matter.
In fact, the lawsuit said that Coinbase’s motivation for not disclosing the true nature of the TerraUSD stablecoin was personal. It alleged that the investment arm of the company, Coinbase Ventures had provided a significant amount of funding to Terraform Labs.
The classes and plaintiffs in the case are bring represented by law firms Erickson Kramer Osborne and Milberg Coleman Bryson Phillips Grossman.
The GYEN Case
Erickson Kramer Osborne is also representing plaintiffs who filed a suit against GMO-Z.com Trust and Coinbase on May 13th because of the depegging of the GYEN stablecoin back in November, which had reportedly been pegged to the Japanese yen. A week after Coinbase listed the GYEN stablecoin on its platform, it had increased in value before it plunged. Some of the user accounts were frozen by the exchange.
The lawsuit said that some users had suffered losses of millions and claimed that GMO-Z.com did not fulfill its duties in regard to the plaintiffs, like not designing the stablecoin properly. As far as Coinbase is concerned, the lawsuit accused the exchange of not using reasonable care and negligent misrepresentation when it listed the GYEN stablecoin, even though there had already been a risk of depegging.
Coinbase’s Troubles Continue
The crypto exchange is facing these lawsuits at a difficult time, as the entire crypto market is experiencing a downturn and there has been a massive decline in trading volumes. Last month, Coinbase had announced that it was freezing its hiring spree and had even rescinded job offers it had already sent. This month, the company announced that in order to survive in the increasingly bearish market, it was going to lay off its workforce, a decision that some of the top companies like Gemini, Crypto.com and Robinhood had already made.