‘Solana and other cryptos are securities’

Coinbase, the well-known cryptocurrency exchange, and its CEO Brian Armstrong are facing a new class action lawsuit. This lawsuit alleges that investors were deceived into selling what are effectively securities, and that Coinbase’s business model is illegal. This includes Solana, the popular hype crypto.

According to the indictment, Coinbase has knowingly violated state securities laws since the company’s inception. The suit, filed in the United States District Court for the Northern District of California, San Francisco Division, represents California and Florida plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi and Brett Maggard.

Solana, Polygon and more

Specifically, the indictment focuses on the sale of tokens such as Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM), which are labeled as securities.

The complainants allege that Coinbase admits to being a “Securities Exchange” in its user agreement, implying that the digital assets it sells are securities in the form of investment contracts. It is further claimed that as part of the services, Coinbase Prime acts as a stock broker.

Full refund

The plaintiffs are seeking full restitution, damages under state law, and injunctions to prevent a recurrence. They are seeking a jury trial. This lawsuit is very similar to an earlier class action lawsuit that also claimed damages from Coinbase’s sale of securities.

However, Coinbase has argued that the sale of secondary crypto assets does not meet the criteria for securities transactions and has challenged the applicability of securities laws.

This lawsuit is separate from Coinbase’s highly publicized legal battle with the U.S. Securities and Exchange Commission, which also challenges whether tokens sold on Coinbase should be classified as securities. Coinbase recently filed an interim appeal following a judge’s decision to continue the case.

Despite the legal battle, Coinbase reported a strong rebound in the first quarter of 2024, supported by an uptick in market performance and the launch of Bitcoin-backed exchange-traded funds. The exchange reported total revenue of $1.6 billion and net income of $1.2 billion for the first quarter, with adjusted EBITDA of $1 billion.