Adam Grabski, an investor in Coinbase, has filed a lawsuit in the Delaware Chancery Court claiming that certain executives and board members of Coinbase used inside information to avoid losses from Coinbase stock sales. According to Bloomberg, the lawsuit alleges that Brian Armstrong, the Chairman and CEO of Coinbase, board member Marc Andreessen, and other executives profited from selling Coinbase shares using insider information. The lawsuit claims that these executives avoided losses of around $1 billion by selling Coinbase shares within days of the firm’s public listing in April 2021.
The lawsuit states that Armstrong sold $291.8 million worth of Coinbase shares within one month of the firm going public, while other executives, including the chief operating officer and chief financial officer, also sold millions of dollars worth of shares. Additionally, Andreessen, who is a board member, sold $118.7 million worth of Coinbase shares, while Fred Ehrsam, a former Coinbase employee who still owned stocks, sold $219.5 million worth of shares. Kathryn Haus, another board member, liquidated $73.5 million worth of Coinbase shares.
The lawsuit alleges that these executives sold off their stock before the management revealed “material, negative information that destroyed market optimism from the company’s first quarterly earnings release forward.” In other words, the lawsuit alleges that the named executives knew there was bad news coming and sold their stocks ahead of the news going public to avoid losses. The lawsuit claims that these actions caused the shares to decline in value by over $1 billion within five weeks.
Grabski, who has held Coinbase shares since April 2021, has accused the executives of using inside information to avoid losses and profiting from their actions. Coinbase has dismissed the lawsuit as one of the many “frivolous” suits it receives and said it is an “example of one of those meritless claims.”
Since going public in April 2021, Coinbase shares have gone downhill, currently trading at around $50, down 85% from the day it went public. The initial reference price of the shares was $250 per share, but by the end of the first trading day, Coinbase shares were trading at over $320.