On Thursday, there was a more than 26% increase in shares of crypto exchange Coinbase, after a class-action lawsuit filed against the company was dismissed by a federal judge in New York, before they ended the day up by 17%.
The lawsuit in question had first been filed against the San Francisco-based company last year in March and it alleged that 79 of the tokens that the exchange was offering were actually unregistered securities.
It said that Coinbase had not registered as a broker-dealer and had sold the unregistered securities directly to customers inappropriately.
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Customers had filed the lawsuit and were seeking refunds on the token purchases, losses, and trading fees that they had potentially incurred when using the platform.
However, the lawsuit was tossed out by US District Judge Paul Engelmayer because he said that the plaintiffs had been unable to prove that the crypto exchange had held the title of the tokens, or had been the immediate seller.
Another aspect of the lawsuit also accused Coinbase of boosting token sales by providing information about cryptocurrencies that people could buy via its exchange.
The information included the description of every token as well as its value proposition and links were also provided to news articles related to the tokens.
This aspect of the lawsuit was also rejected.
The stock price
The price per share of Coinbase had been $33.60 at the beginning of the year, but it climbed to $82 per share, which marks a gain of 145% in just a month’s time.
Nonetheless, the stock price of Coinbase is still 79% below the all-time high value that it had hit in November 2021 at $357.39.
The court order
Judge Engelmayer’s court order highlighted some elements of the user agreement of Coinbase, which outright contradict the allegations that have been made in the lawsuit.
Coinbase’s user agreement dictates clearly that where transaction handling is concerned, users are not dealing with the exchange directly when they trade on the platform.
Instead, Coinbase functions as an ‘agent’, and its role is to facilitate the transactions between buyers and sellers.
In addition, the user agreement also informs customers that the ownership title associated with digital assets belongs to the customers and is not transferred to the exchange at any time.
The dismissal of federal claims that were made in the lawsuit was done with prejudice by Judge Engelmayer, which means that plaintiffs cannot file the claim in the Southern District of New York again.
As far as the state claims are concerned, the judge dismissed them without prejudice. Last May, the legal team of Coinbase filed a motion to have the case dismissed.
Even though the case’s dismissal certainly comes as good news for the crypto exchange, it is also facing lawsuits in other states, including Georgia and New Jersey.