A class action lawsuit was filed against Coinbase on Thursday alleging that the trading platform was negligent in listing the TerraUSD stablecoin and failed to disclose its financial relationship with Terraform Labs. This is the second class action lawsuit against Coinbase. A lawsuit was filed last month in connection with GYEN’s withdrawal from the exchange in November.
Thursday’s lawsuit alleges that Coinbase was negligent for failing to do due diligence in investigating Terraform Labs before listing TerraUSD and for misrepresenting the token’s risk as an algorithmic stablecoin. The lawsuit compares information on stablecoins provided by trading platforms Robinhood, Gemini, and Kraken to that of Coinbase and concludes that “instead of disclosing the nature of TerraUSD as non-collateralized, algorithm controlled, and highly risky, Coinbase made it pass as just another stablecoin”.
The lawsuit also alleges that Coinbase Ventures, the company’s investment arm, was one of the largest backers of Terraform Labs, and that was additional motivation for the company not to disclose the volatility of TerraUSD.
The plaintiffs and classes in the case are being represented by the law firms Milberg Coleman Bryson Phillips Grossman Y Erickson Kramer Osborne. The latter firm is also representing plaintiffs in a case filed against Coinbase and GMO-Z.com Trust on May 13 regarding the exchange’s delisting of yen-backed stablecoin GYEN in November.
The value of the GYEN token skyrocketed and then plummeted a week after it was listed on Coinbase, causing the platform to freeze some users’ accounts. Some users also lost money – “untold millions,” according to the lawsuit – during the incident. The lawsuit claims that GMO-Z.com failed to meet its obligations to the plaintiffs and the group in several respects, starting with the design of the stablecoin.
Coinbase is alleged to have engaged in negligent misrepresentation and failed to exercise due diligence in listing GYEN on its platform despite a reasonably foreseeable risk of de-pegging from the yen.
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