Southern District Of New York Dismisses Putative Class Action Against Cryptocurrency Exchange For Failure To Adequately Allege “Statutory Seller” Status Or Prohibited Contracts
02/14/2023
On February 1, 2023, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York dismissed a putative class action against a cryptocurrency exchange company, its parent, and the parent’s CEO, asserting claims under Section 12(a)(1) of the Securities Act of 1933, Section 29(b) of the Securities Exchange Act of 1934, and certain California, Florida, and New Jersey statutes. Underwood v. Coinbase Global, Inc.,—F. Supp. 3d—, 2023 WL 1431965 (S.D.N.Y. 2023). Plaintiffs alleged that the company sold or solicited securities, and entered into contracts to buy and sell securities, without registering as an exchange or broker-dealer. The Court held that, even if cryptocurrencies were deemed securities, plaintiffs failed to adequately allege that the company itself sold or solicited cryptocurrency tokens to or from exchange participants, or that any contract with the company required plaintiffs to purchase or sell prohibited securities.