A U.S. federal judge has ruled that Coinbase must face a narrowed shareholder lawsuit alleging it misled investors about key business risks, including the likelihood of being sued by the Securities and Exchange Commission (SEC).
In a 59-page ruling issued Tuesday night, Judge Brian Martinotti of the U.S. District Court in New Jersey rejected Coinbase’s bid for a full dismissal of the case. The lawsuit accuses the cryptocurrency exchange and several of its top executives and board members of fraudulently concealing regulatory and financial risks in public statements over a two-year period.
The shareholders allege Coinbase made misleading claims suggesting it was unlikely to face SEC enforcement, and that customer assets would remain protected even if the company filed for bankruptcy. These statements, made through earnings calls, regulatory filings, blog posts, and social media, allegedly inflated investor confidence.
Judge Martinotti ruled that plaintiffs could not proceed based solely on “group pleading”, where statements in company-wide documents do not specify individual responsibility. However, he allowed the lawsuit to continue for claims where investors provided specific allegations tied to individual defendants, writing, “Where plaintiffs have appropriately provided defendant-by-defendant particularity, the claims must remain.”
In a notable aside, Martinotti criticized the lack of clarity in the plaintiffs’ filings, remarking humorously, “Judges are not like pigs, hunting for truffles buried in briefs.”
Coinbase called the ruling a “significant step forward,” saying it would continue to “vigorously defend against any remaining claims.” Attorneys representing the shareholders did not immediately respond to media requests.
The case stems from major stock drops in 2022 and 2023, including a 26% plunge on May 11, 2022 after Coinbase reported disappointing revenues and added new risk disclosures, and a 12% drop on June 6, 2023 following the SEC lawsuit alleging the company operated as an unregistered securities exchange.
The class action, led by Swedish pension fund Sjunde AP-Fonden, covers investors who bought Coinbase shares between April 14, 2021, and June 5, 2023.
The SEC’s own case against Coinbase was dropped in February 2025, after the Trump administration moved to loosen federal oversight of the cryptocurrency sector, marking a major shift in the U.S. regulatory approach to digital assets.
The case is In re Coinbase Global Inc. Securities Litigation, U.S. District Court, District of New Jersey, No. 22-04915.