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Coinbase Must Face Customer Lawsuit in New York Court

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Coinbase must defend itself in a lawsuit filed by customers who claim that the company illegally sold securities without registering as a broker-dealer, a federal judge ruled on Friday. U.S. District Judge Paul Engelmayer in Manhattan dismissed Coinbase’s argument that it was not a “statutory seller” under federal securities laws because it did not transfer title to the 79 tokens customers traded.

Judge Engelmayer referenced the accusation that Coinbase facilitates transactions solely between itself and the customers, which led to the conclusion that the exchange was acting as a seller. He also rejected the dismissal of claims under the laws of California, Florida, and New Jersey, agreeing that customers adequately argued that Coinbase was a direct seller of the tokens.

Coinbase has consistently stated it does not list, offer, or sell securities on its platform. The company expressed its intent to defend itself against the remaining claims in court. Customer lawyers did not immediately comment on the ruling.

This ruling comes after the 2nd U.S. Circuit Court of Appeals revived parts of the lawsuit in April 2023, which had initially been dismissed by Engelmayer in February of the same year. Customers are seeking unspecified damages.

In addition to the private lawsuit, the U.S. Securities and Exchange Commission (SEC) is also suing Coinbase, alleging the exchange allowed the trading of tokens that should have been registered as securities. Last month, a separate federal judge temporarily paused the SEC’s case to allow Coinbase to seek clarification from the 2nd Circuit on whether digital token trades fall under the definition of investment contracts.

German Activists Sue X Over Lack of Election Influence Data

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Two activist groups have filed a lawsuit against Elon Musk’s social media platform X, accusing it of violating European law by refusing to provide necessary data to track disinformation ahead of Germany’s national election on February 23. The Society for Civil Rights (GFF) and Democracy Reporting International (DRI) claim that X is not offering systematic access to important information, such as the reach of posts, likes, and shares, which other platforms have made available for monitoring.

According to Michael Meyer-Resende of DRI, the groups have the right to access this data under the European Union’s Digital Services Act. Despite requests, X has not granted access to the data needed for tracking public debates on the platform.

The lawsuit comes amid heightened concerns over online disinformation ahead of elections in Europe, especially after the controversial presidential election in Romania in 2024, which was allegedly influenced by a Russian-driven social media campaign, though Moscow denied any involvement.

The situation is further complicated by Musk’s endorsement of Germany’s far-right political party, Alternative for Germany (AfD), and his continued influence over the platform. Since taking control of Twitter (now X), Musk has limited access to data for researchers, charging for what was previously free, raising concerns about transparency and potential misuse of the platform in democratic processes.

 

Musk’s Lawsuit Against OpenAI May Proceed to Trial, Judge Says

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A U.S. District Judge, Yvonne Gonzalez Rogers, announced on Tuesday that parts of Elon Musk’s lawsuit against OpenAI could go to trial, with Musk himself required to testify in court. The case, which centers on Musk’s effort to block OpenAI’s transition to a for-profit entity, is evolving into a public legal battle between Musk and OpenAI CEO Sam Altman.

Judge Rogers, presiding in Oakland, California, stated that “something is going to trial in this case,” and indicated that Musk would be called to the stand to present his case to a jury. She also noted that Musk’s legal team had not provided sufficient evidence to issue a preliminary injunction halting the transition, suggesting the possibility of an evidentiary hearing where both sides could present witnesses and evidence.

The case stems from Musk’s claims that OpenAI’s founders initially approached him to help fund a nonprofit organization focused on developing artificial intelligence (AI) for the benefit of humanity. However, Musk contends that OpenAI has since shifted its focus to making a profit. Musk’s lawsuit, filed last year, expanded to include antitrust and other claims against the company. He has asked the court to prevent OpenAI from completing its transition to a for-profit business.

OpenAI, in its defense, has moved to dismiss Musk’s claims, arguing that Musk should focus on competing in the marketplace rather than through legal channels. The company argues that restructuring to a for-profit entity is necessary to secure the capital needed to continue developing advanced AI models. A recent fundraising round of $6.6 billion and a potential future round of up to $25 billion from SoftBank hinge on OpenAI’s restructuring.

The situation has raised questions about the unusual nature of nonprofit organizations converting into for-profit entities. Rose Chan Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits, pointed out that such transitions are typically seen in health care sectors, not in venture capital-backed tech companies.