A federal judge is reportedly ruling that top US-based crypto exchange Coinbase must face a class action lawsuit in New York.
According to a new report from Reuters, Paul Engelmayer, a judge for the Southern District of New York, is rejecting Coinbase’s argument that it did not qualify as a “statutory seller” to dismiss a lawsuit that alleges the firm illegally sold securities in the form of digital assets to customers without being registered as a broker-dealer.
Engelmayer says that Coinbase’s claim was invalid because it never passed title to the 79 crypto assets traded by customers, noting that “customers on Coinbase transact solely with Coinbase itself.”
In a statement, Coinbase says,
“Coinbase does not list, offer, or sell securities on its exchange. We look forward to vindicating the remaining claims in the district court.”
Engelmayer further rejected to dismiss claims governed by the laws of California, New Jersey and Florida, noting that the complainants have sufficient grounds to allege that Coinbase was the direct seller of the crypto assets.
In February of 2023, Engelmayer dropped the lawsuit but an appellate court reviewed the case and decided to return some parts of it to the judge.
In June 2023, Coinbase was sued by the U.S. Securities and Exchange Commission (SEC) for allegedly violating securities laws as well as operating as an unlicensed broker-dealer.
However, a year later, Coinbase filed its own lawsuit against the regulatory agency alongside the Federal Deposit Insurance Corporation (FDIC) claiming that they were out to intentionally cripple the digital assets industry.
As stated by Coinbase at the time,
“The SEC has waged a scorched-earth enforcement war on digital-asset firms that, in conjunction with efforts by other financial regulators to de-bank crypto firms, is designed to cripple the digital asset industry.”
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