Coinbase executives sued in shareholder derivative lawsuit

A Coinbase shareholder has filed a derivative lawsuit against several of the crypto exchange’s executives and board members, alleging oversight failures that exposed the company to regulatory penalties and legal risks.

The complaint, filed in the U.S. District Court for the District of New Jersey by shareholder Kevin Meehan on behalf of Coinbase Global, names CEO Brian Armstrong, co-founder Fred Ehrsam and several senior executives.

The lawsuit claims the defendants made false or misleading statements between April 2021, when Coinbase went public via direct listing, and June 2023, contributing to compliance failures.

In early 2023, Coinbase agreed to pay $100 million to settle allegations from the New York State Department of Financial Services over deficiencies in its anti-money laundering program.

The company was also fined $5 million by the New Jersey Bureau of Securities related to the listing of unregistered securities.

The shareholder suit seeks damages for Coinbase, governance reforms and the clawback of compensation and profits allegedly earned by insiders during the period of compliance failures.

The case adds to a series of legal challenges facing Coinbase, including other shareholder lawsuits and claims tied to insider trading allegations and a past user data breach.