Coinbase’s legal battle over alleged insider trading reached a new stage this week when a Delaware judge refused to dismiss a shareholder lawsuit, keeping alive allegations that top executives and directors sold shares while holding inside information.
Reports say the ruling does not resolve guilt or innocence. It simply allows the case to continue in court.
The court allows the case to move forward
According to filings and press reports, the lawsuit — filed by a shareholder in 2023 — accuses CEO Brian Armstrong and board member Marc Andreessen, among others, of selling large chunks of Coinbase stock around the company’s 2021 direct listing.
The complaint alleges that these sales totaled nearly $3 billion and that the insiders avoided losses of more than $1 billion by acting before negative information reached the market.
A judge’s decision to deny a motion to dismiss depends not so much on exact dollar figures as on questions about the process.
Reports indicate that a special litigation committee within Coinbase has already looked into the claims and exonerated the managers. But the court expressed concerns about whether that committee was truly independent.
Big names, big bets
Many headlines have highlighted Andreessen’s name due to his profile and past business links. This interest is not limited to the characters.
Reports say the key issue for the court is whether the committee’s connections — direct or indirect — may have skewed its review, making the committee’s blessing less convincing as a legal shield.
Coinbase has backed down. The company and some defendants say the sales were legitimate, part of the normal liquidity and market mechanisms associated with a direct listing, and not secret profit-taking based on hidden problems.
These defenses were referred to in the files examined by the judge. However, the lawsuit will now proceed through discovery and other preliminary steps.
Questions about the independence of the committee
Legal observers say the case highlights a recurring problem in corporate cases: When an internal review finds no wrongdoing, courts will continue to test how that review was conducted and by whom.
If the review appears biased, the court may allow the claim to survive early challenges so the facts can be tested under oath.
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