Coinbase, one of the most popular exchanges on the scene, has been the subject of a lot of legal complaints in the past month. The class action suit was filed on Tuesday in California district court. According to the complaint, the wallet of the man in the suit was drained in April. According to the suit, the systems put him through a loop of impenetrable screens that prevented him from explaining his situation to any human being and was unable to remedy the theft of his savings. According to attorneys, someone gained access to his account through his code. According to the complaint, the company told him that it wasn't responsible for the theft of the money. The company takes "extensive security measures to ensure our customer accounts remain safe" according to a spokesman. We educate our customers on how to avoid certain types of scam. Four separate lawsuits have been brought against the Los Angeles-based exchange since the beginning of August, though this latest suit against Coinbase is just a drop in the bucket. Less than a week after the Securities and Exchange Commission announced it was investigating whether the exchange had mis categorized its assets, things began. Just a few days before that news came out, the SEC brought the hammer down on the former manager of the company, accusing him of giving his brother and a friend inside information. In the last few months, there has been a debate over whether or not to treat the digital asset as a security. The SEC chair wrote in a Wall Street Journal op-ed last week that there is no reason to treat thecryptocurrencies differently from the rest of the capital markets. The first of two lawsuits claimed that the company lied to users about the assets it was putting into the exchange. The class action suit was filed by the investment law firm PomerantzLLP in the New Jersey district court. A second aspiring class action lawsuit, filed in Delaware district court that same day, wants to hold the exchange's feet to the fire over whether the company would use its userscryptocurrencies as its own assets in case of insolvency.
The lawsuits base their complaint on a May 10 quarterly filing in which they stated that they would protect their assets if they went bankrupt.
“Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”
This last complaint was clapped back against by the company. The SEC disclosure was part of a requirement by the federal agency, and CEO Brian Armstrong went out of his way to tell users that. He apologized for not making it clear that legal protections of the assets have not been tested in court.
The legal carrion birds continued to circle. The first two class action complaints were filed by Georgia resident George Kattula. According to the complaint filed in Georgia district court, the company has not registered its assets as securities, has not kept its customers' accounts secure, and has locked consumers from accessing their accounts for extended periods of time or permanently.
Users have been worried that the exchange would cut off their access to their funds, like they have before. The company told Gizmodo that there were problems with the back-end that had been fixed. Despite attempts to calm the nerves of the millions of users, the company has had to distance itself from failed firms to show that it is not yet ready to haul up its own tombstone.
Paul Grewal, the chief legal officer at Coinbase, has gone out of his way to let users know that their funds are theirs and that theircryptocurrencies are theirs as well.
The class actions have a long way to go before any financial penalties are handed down. The members of the class action are being asked for damages of $5 million.
The ongoing coin winter has been difficult for the company. An announcement that the exchange was cutting over 1,000 staff positions followed up on initial reports of the company withdrawing job offers. In a recent interview with CNBC, he said he expects the winter to last at least a year and a half.
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