Coinbase executives and board members avoided more than $1 billion in losses by using inside information to sell stock within days of the cryptocurrency platform’s public listing two years ago, before bad news sent the share price tumbling, according to a lawsuit filed by an investor.
The board used a so-called direct listing instead of a more typical initial public offering and rapidly sold off $2.9 billion in stock before management later revealed “material, negative information that destroyed market optimism from the company’s first quarterly earnings release forward”, Adam Grabski said in the lawsuit.
The complaint was unsealed on Monday in the Delaware Chancery Court.
“Within five weeks, those shares declined in value by over $1 billion, and Coinbase’s market capitalisation plummeted by more than $37 billion,” said Mr Grabski, who said he has held Coinbase shares since April 2021.
Coinbase chairman and chief executive Brian Armstrong sold $291.8 million of the platform's stock as part of the direct listing, according to the complaint, while board member Marc Andreessen’s venture capital company, Andreessen Horowitz, dumped $118.6 million worth of the stock.
“As the most popular and only publicly traded crypto exchange in the US, we are, at times, the target of frivolous litigation,” Coinbase said in an emailed statement.
“This is an example of one of those meritless claims.”
The “derivative” complaint filed on the company’s behalf seeks the return of “ill-gotten gains” from Mr Armstrong and Mr Andreessen, along with president Emilie Choi, chief financial officer Alesia Hass, chief accounting officer Jennifer Jones, former chief product officer Surojit Chatterjee and board members Frederick Ersham, Fred Wilson and Kathryn Haun.