A federal judge has ruled that Coinbase Global Inc. must face a narrowed shareholder lawsuit accusing the crypto exchange of hiding business risks. The lawsuit may involve action by the Securities and Exchange Commission (SEC) and potentially impact the outcome of bankruptcy proceedings.
U.S. District Judge Brian Martinotti’s decision on Tuesday night in Newark, New Jersey, rejected requests from Coinbase, its executives, and directors for a complete dismissal of the case. The ruling means that while some claims were dismissed, others with specific allegations against individual defendants will proceed.
Martinotti says shareholders cannot pursue a case based on a group pleading
Shareholders said that Coinbase misled them into believing it was improbable that the SEC would accuse the company of operating an unregistered securities exchange. They also claim that the company failed to disclose the risk that customers could lose assets in the event of bankruptcy.
JUST IN: A federal judge has allowed a narrowed shareholder lawsuit against Coinbase to move forward, accusing it of hiding SEC litigation risks and potential asset loss. pic.twitter.com/6GZqRTL5uA
— Cryptopolitan (@CPOfficialtx) October 1, 2025
According to the decision of U.S. District Judge Martinotti, shareholders were prohibited from pursuing claims based solely on group pleading. He cited a scenario where statements made in company documents, such as press releases and blog posts, cannot automatically be tied to a specific defendant. According to Martinotti, claims must remain where plaintiffs have appropriately provided defendant-by-defendant particularity.
However, the judge’s 59-page decision does not specify which statements were dismissed because the parties did not identify which may constitute group pleading.
Coinbase’s stock on NASDAQ is up 2.8% at the time of publication, trading at $344.23. On June 6, 2023, the stock also dropped by roughly 12% following the SEC’s lawsuit accusing Coinbase of allowing trading in tokens that the SEC considered unregistered securities. Despite several lawsuits, the stock has maintained a positive YTD of 38.4%, showing positive investor confidence in the token.
The shareholder lawsuit, led by Swedish pension fund Sjunde AP-Fonden, covers shareholders who bought Coinbase stock between April 14, 2021, and June 5, 2023. The suit outlines several accusations, including the dissemination of misleading information in dozens of statements made in regulatory filings, earnings calls, blog posts, and social media posts over a two-year period. The lawsuit is set to move forward, even though the SEC ended its case against Coinbase earlier this year, following the Trump administration’s move to ease regulatory oversight of the cryptocurrency industry.
Coinbase’s legal woes deepen following the previous data breach suit
According to a recent post by Cryptopolitan, Coinbase had previously requested that the U.S. Department of Justice intervene against state-level enforcement actions that conflict with federal law. The DOJ described it as a “patchwork” of lawsuits and licensing schemes that is fracturing the U.S. cryptocurrency market.
In a letter to the DOJ, Paul Grewal, Chief Legal Officer at Coinbase, urged federal action to prevent states from bringing enforcement actions where activities are lawful under federal rules. Coinbase singled out Oregon’s lawsuit accusing Coinbase of selling unregistered securities and criticized New York’s attempt to treat Ethereum as a security and to stop staking.
Coinbase also highlighted the stop-and-desist orders received from California, Maryland, New Jersey, and Wisconsin regarding its staking services, as well as the most recent action in Maine, which targeted self-custody wallets.
Grewal asked the U.S. Department of Justice to support broad preemption provisions in pending congressional legislation, including the House-passed CLARITY Act and the Senate’s Responsible Financial Innovation Act. Lawmakers on the Senate Banking Committee are expected to take up a vote on the market-structure legislation soon.
Coinbase also faced at least six lawsuits for exposing nearly 80,000 users in a lawsuit filed between May 13 and May 16, 2025. The lawsuits accused Coinbase of failing to protect customer data, violating privacy laws, and mishandling the fallout from the breach. One complaint in New York alleges that Coinbase’s security practices were inadequate, fragmented, and delayed, exposing users to identity theft and fraud.
