A Coinbase shareholder, Kevin Meehan, filed a derivative lawsuit on behalf of the company, alleging that CEO Brian Armstrong and other executives made misleading statements between April 2021 and June 2023 and failed to disclose risks regarding customer asset custody, token-listing securities implications, and anti-money laundering compliance deficiencies. Defendants include co-founder Fred Ehrsam, Chief Legal Officer Paul Grewal, President and COO Emilie Choi, and several board members. The suit claims that Coinbase’s user agreement states funds in escrow wallets are assets held by the company on behalf of customers, but does not disclose that these assets could be included in a bankruptcy estate, potentially turning retail users into unsecured creditors.
Additionally, it argues that the platform’s listing-review process purportedly ensures no securities appear on Coinbase, yet some tokens still bear securities risks. Finally, the complaint accuses several executives of trading shares using undisclosed information around Coinbase’s direct listing in 2021.
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