Coinbase insiders sued for selling $2.9 billion in stock, demanding top executives repay illegal gains

Long-term investors of Coinbase have accused Coinbase CEO Brian Armstrong, several top executives, and members of the board of directors of using insider information to avoid over $1 billion in losses to date.

Coinbase Accused of Using Insider Trading to Avoid Over $1 Billion in Losses

According to a report by Bloomberg, Adam Grabski, a long-term investor in Coinbase, has filed a lawsuit on behalf of the company against Coinbase CEO Brian Armstrong, several top executives, and board members. The lawsuit alleges that shortly after the company's listing on Nasdaq two years ago, they collectively sold stocks worth approximately $2.9 billion within a few days, avoiding losses of over $1 billion, about a 35% drop over the following five weeks. Armstrong, in particular, sold 750,000 shares worth about $291.8 million in three transactions.

Subsequently, Coinbase internally acknowledged that significant negative news had disrupted market optimism following the release of the company's first-quarter financial results. However, investors criticized Coinbase executives for engaging in what they perceived as intentional market manipulation through selling off stocks before mentioning the so-called "bad news."

(Note: The report did not specify the details of the negative news, but Coinbase has recently received Wells Notices related to securities.)

Some Voices Argue Against the Narrative of "Coinbase Engaged in Pump and Dump"

It is worth noting that at the time, Coinbase went public through a direct listing rather than an IPO, which meant that insider transactions were not subject to lock-up periods as in the case of IPOs. Hence, some argue that insider selling was to be expected.

Those following the incident pointed out that these insiders held significant options and had a high percentage of total holdings in their possession. For example, Armstrong only sold 1.5% of his shares.

Is This Not the First Time Coinbase Sold Stocks Before Negative News Emerged?

According to a report, Coinbase's CEO had also sold stocks worth approximately $5.71 million in four transactions before receiving a "Wells Notice" from the SEC in March, which was followed by a more than 10% drop in the stock price.

(Source: https://twitter.com/theirish_man, original tweet has been deleted)

Coinbase's response: "As the leading and only publicly traded cryptocurrency exchange in the United States, we sometimes become the target of baseless and unfounded accusations."