Coinbase Faces Class Action Lawsuit Over Security Concerns

August 25, 2022 2:38 pm

Coinbase is now being accused in a class action lawsuit for failing to to protect customer’s accounts and leaving them vulnerable to theft.

The lawsuit was initiated in a federal court located in Georgia and is seeking damages of millions of dollars.

However, that was not the only thing that was included in the complaint as there were also accusations of Coinbase causing financial harm to its customers by locking them out of their accounts for long periods of time.

This is not the first time that Coinbase has received lawsuits as it has done faced a string of lawsuits before in the past from unhappy investors.

CoinDesk reports:

Coinbase, which last year became the first cryptocurrency exchange to go public in the U.S., is facing a string of lawsuits from unhappy investors.

In addition to another aspiring class action lawsuit filed in New Jersey alleging the company allowed U.S. persons to trade unregistered securities, earlier this month, a Coinbase shareholder accused the company of misleading investors about last year’s public listing.

The platform is also trying to settle two separate lawsuits filed by investors through arbitration.

The Georgia lawsuit represents a class of more than 100 people, including lead plaintiff and Georgia resident George Kattula, though Kattula’s attorneys say there may be more victims.

“We are aware of a large number of fraudulent transactions in the accounts of Coinbase customers,” said John Herman of Herman Jones LLC, the Georgia-based law firm representing Kattula, in an emailed statement to CoinDesk. “We are encouraging all Coinbase account holders to review their accounts carefully and advise us promptly of any irregular activity.”

Diving into the lawsuit details, it seems like Coinbase had locked a user out of their account for around 6 months in the past which sparked a lot of controversy.

The other part that was brought up in the lawsuit were accusations that some of the assets that were being traded on the exchange were considered securities.

Therefore, some were claiming that the exchange itself should be considered a security exchange which would require it to register with regulators under federal law.

The results of the class action lawsuit is still being determined, but it seems that this is something that all exchanges may have to go through as regulators may become more strict on crypto within the US.

CoinDesk concludes:

The lawsuits began piling up this year after the SEC said it was investigating Coinbase over the alleged sale of crypto securities in July.

“Coinbase’s user growth has outpaced its ability to provide the account services and protections it promises to consumers,” Kattula’s complaint said.

The suit alleges Coinbase’s failure to “establish and maintain adequate cybersecurity measures” caused investors to lose their “wallet and account access, the assets and investments in those accounts” as well as “sensitive personally identifiable information stored in their Coinbase accounts, and, among other things, their investment opportunities.”

Kattula’s suit is seeking damages exceeding $5 million (excluding his legal costs and fees), a binding judgement, and injunctive relief, which is an order to prohibit involved parties from carrying out certain activities.

Coinbase did not respond to a request for comment by press time.

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