Coinbase’s legal battle over alleged insider trading took a new step this week when a Delaware judge refused to dismiss a shareholder lawsuit, keeping alive allegations that top executives and directors sold shares while possessing inside information.
Reports indicate that the decision resolves neither guilt nor innocence. That just lets the matter continue in court.
The Court lets the case move forward
According to filings and news reports, the lawsuit – filed by a 2023 shareholder – accuses CEO Brian Armstrong and board member Marc Andreessen, among others, of selling large blocks of Coinbase shares around the company’s 2021 direct listing.
The complaint alleges that these sales totaled nearly $3 billion and that insiders avoided more than $1 billion in losses by acting before negative information reached the market.
The judge’s decision to deny a motion to dismiss is based less on hard numbers than on questions of process.
Reports indicate that a special dispute committee within Coinbase had already reviewed the claims and cleared the administrators. But the court raised concerns about the true independence of this committee.
Big names, big stakes
Many headlines have highlighted Andreessen’s name due to his profile and past business ties. This attention does not only concern personalities.
Reports indicate that the main question for the court was whether the committee’s ties — direct or indirect — might have skewed its review, making the committee’s blessing less compelling as a legal shield.
Coinbase pushed back. The company and some defendants argue that the sales were legitimate, part of the normal liquidity and market mechanisms associated with the direct listing, and not that it was secret profit-taking based on hidden issues.
These defenses were noted in the documents reviewed by the judge. However, the trial will now go through discovery and other pre-trial stages.
Questions about committee independence
Legal observers say the case highlights a recurring problem in corporate lawsuits: When an internal review finds no wrongdoing, courts always look into how and by whom that review was conducted.
If the review appears biased, the court may allow a lawsuit to survive initial challenges so that the facts can be verified under oath.
Featured image from Pexels, chart from TradingView
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