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Investors sue Coinbase over bankruptcy and risk disclosures

A U.S. federal judge has allowed Coinbase shareholders to pursue a narrower version of their class-action lawsuit, which accuses the crypto exchange of misleading investors about regulatory and financial risks.

U.S. District Judge Brian Martinotti in Newark, New Jersey, ruled this week that the case can proceed, rejecting Coinbase’s request to dismiss it entirely. The decision marks a key step for investors who say they were misled about the potential for U.S. regulators to target the company and the security of customer funds during bankruptcy.

In a 59-page ruling, Martinotti declined to parse through every disputed claim, writing in a footnote that “judges are not like pigs, hunting for truffles buried in briefs,” a nod to the parties’ disagreement over which allegations were still at issue.

The class action, led by Sweden’s Sjunde AP-Fonden pension fund, represents Coinbase shareholders who bought stock between April 14, 2021, and June 5, 2023 — a period marked by major volatility in both crypto markets and regulatory scrutiny.

According to filings cited by Reuters, the shareholders claim Coinbase and certain executives — including CEO Brian Armstrong and CFO Alesia Haas — made misleading statements and omissions about key risks.

Specifically, investors argue that Coinbase:

Downplayed the likelihood of the U.S. Securities and Exchange Commission (SEC) taking enforcement action.
Failed to warn that customers could lose access to their assets if the company filed for bankruptcy.
Understated how regulatory and operational risks could impact its financial performance.

The alleged misrepresentations appeared in regulatory filings, earnings calls, blog posts, and social media communications from 2021 through 2023, according to the complaint.

The shareholder suit unfolds against the backdrop of Coinbase’s broader battle with the SEC. The regulator sued the company in 2023, alleging it had illegally listed and sold securities. Coinbase denied the allegations, arguing that its exchange listings did not qualify as securities transactions.

That case was later dropped in February 2025, after the Trump administration signaled a more industry-friendly stance on digital asset regulation.

In response to the ruling, Coinbase issued a statement calling the decision a "significant step forward," and said it remains committed to defending itself against the remaining claims. Lawyers representing shareholders did not immediately respond to requests for comment.

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