Quick Facts
- Coinbase, a leading cryptocurrency exchange, has been hit with another proposed class-action lawsuit over its recent data breach and alleged failure to disclose a violation of an agreement with the UK’s Financial Conduct Authority (FCA).
- The lawsuit joins a growing list of similar suits filed against the company, which has sparked concerns about the security and integrity of user data.
Coinbase Faces Another Data Breach Lawsuit, Claims Stock Drop Damages
In a latest development, Coinbase, a leading cryptocurrency exchange, has been hit with another proposed class-action lawsuit over its recent data breach and alleged failure to disclose a violation of an agreement with the UK’s Financial Conduct Authority (FCA). This lawsuit joins a growing list of similar suits filed against the company, which has sparked concerns about the security and integrity of user data.
The latest lawsuit was filed on May 22nd by Coinbase investor Brady Nessler in a Pennsylvania federal court. Nessler claims that the data breach, which affected millions of users, and the alleged breach of the agreement with the FCA resulted in a “precipitous decline in the market value of the Company’s common shares,” causing stockholders to suffer “significant losses and damages.”
Alleged Breach of FCA Agreement
According to the complaint, Coinbase’s UK arm was fined $4.5 million in July 2024 for breaching a 2020 voluntary agreement to prevent the exchange from onboarding customers considered high-risk by the FCA. The regulator fined Coinbase for onboarded 13,416 customers that were deemed high-risk and offered them cryptocurrency services.
Nessler claims that the fine saw Coinbase’s stock fall by over 5%, closing at $231.52 on July 25, 2024. He further alleges that Coinbase did not disclose the breach of the agreement when the company first listed its shares on the Nasdaq in April 2021, leading to the “artificial inflation” of the stock price. As a result, Nessler claims that he would not have purchased the stock at the “artificially inflated prices” had he known about the agreement violation.
Data Breach and Stock Drop
The data breach, which was disclosed on May 15th, saw Coinbase hit with a proposed class-action lawsuit claiming that the company failed to protect user data and did not disclose the breach in a timely manner. Now, Nessler’s lawsuit claims that the stock drop following the breach disclosure, which saw Coinbase shares drop by 7.2%, has led to significant losses and damages for stockholders.
A Growing Trend of Lawsuits
Coinbase has faced at least six lawsuits in the days following the data breach, with another lawsuit filed in Illinois on May 13th alleging that Coinbase failed to notify users in writing of the collection, storage, or sharing of their biometric data and the purpose and retention schedule for their data.
The surge in lawsuits against Coinbase highlights the growing concerns about the company’s data security and the potential impact on stockholders. As the cryptocurrency market continues to evolve, it is crucial for companies like Coinbase to prioritize the security and integrity of user data to maintain the trust of their users and investors.
What’s Next for Coinbase?
In light of the growing number of lawsuits, Coinbase needs to take immediate action to address the concerns raised by investors and users. The company must prioritize data security and provide clear and timely disclosures to users about any breaches or violations of agreements.
Moreover, Coinbase should consider implementing measures to prevent similar breaches in the future, such as enhancing its data security protocols and conducting regular audits to identify vulnerabilities.
