Coinbase Faces New Lawsuit: Data Breach and Stock Plummet
Coinbase Global, Inc., along with two of its executives, are facing another class-action lawsuit. This legal action follows the recent disclosure of a significant data breach and allegations of non-disclosure of a regulatory violation in the UK. The lawsuit claims that these events led to a sharp decline in Coinbase’s stock price, resulting in substantial losses for investors.
The lawsuit, filed by investor Brady Nessler in a Pennsylvania federal court on May 22nd, alleges that the data breach, coupled with the alleged violation of an agreement with the UK’s Financial Conduct Authority (FCA), caused a “precipitous decline” in Coinbase’s share value. Nessler claims these actions directly resulted in significant financial losses for stockholders.
Coinbase’s May 15th announcement revealed a potential $400 million in damages stemming from a $20 million extortion attempt four days prior. The breach involved compromised internal systems and the theft of limited user account data, allegedly facilitated by bribed customer support agents.
Following the disclosure, Coinbase (COIN) shares experienced a 7.2% drop, closing at $244 on May 15th. Although the stock rebounded slightly the following day, closing at $266, it subsequently experienced further fluctuations. As of Friday, May 23rd, COIN closed at $263, down over 3% for the day.
Nessler’s complaint is unique among the multiple lawsuits filed against Coinbase, specifically focusing on the damages resulting from the stock price decline post-breach announcement. At least six lawsuits have been filed against the exchange since the disclosure, all alleging mishandling of the incident and failure to adequately protect user data.
FCA Agreement Breach and Stock Impact
The lawsuit also highlights Coinbase’s July 2024 fine from the FCA – a $4.5 million penalty for violating a 2020 agreement. This violation involved onboarding 13,416 customers deemed high-risk by the FCA, offering them crypto services in contravention of the agreement. The lawsuit argues that the non-disclosure of this violation before Coinbase’s initial public offering (IPO) in April 2021 artificially inflated the stock price.
Nessler alleges that had the agreement breach been disclosed, she would not have purchased Coinbase stock at what she considers artificially inflated prices. The lawsuit seeks damages and a jury trial on behalf of all who purchased Coinbase stock between April 14, 2021, and May 14, 2025. Brian Armstrong, CEO, and Alesia Haas, CFO, are also named as defendants.
Another lawsuit, filed in Illinois on May 13th, accuses Coinbase of violating the state’s Biometric Privacy Law. This separate action adds to the mounting legal challenges faced by the cryptocurrency exchange.