Coinbase investor Adam Grabski has filed a lawsuit in the Delaware Chancery Court accusing certain Coinbase executives and board members of using inside information to avoid losses from the sale of Coinbase stock. According to the lawsuit, Coinbase Chairman and CEO Brian Armstrong, board member Marc Andreessen, and other executives used insider information to sell Coinbase shares and avoid losses of around $1 billion within days of the firm’s public listing in April 2021.
Executives Accused of Selling Stock Before Bad News Went Public
The lawsuit alleges that the named 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 executives knew there was bad news coming and sold their stocks ahead of the news going public to avoid losses. The lawsuit also claims that the executives sold their shares before the stock’s decline, which caused Coinbase’s market capitalization to plummet by more than $37 billion.
The lawsuit names several executives and board members who sold Coinbase shares within one month of the firm going public. Coinbase CEO Brian Armstrong sold $291.8 million worth of shares, while COO Emelie Choi and CFO Alesia Haas sold $219.7 million and $99.3 million, respectively. Fred Ehrsam, who left Coinbase in 2017 but still owned stocks, sold $219.5 million worth of shares, while board member Kathryn Haus liquidated $73.5 million worth of Coinbase shares. The biggest sale was carried out by Fred Wilson, a Coinbase investor who sold $1.8 billion worth of shares.
Coinbase has dismissed the lawsuit as a meritless claim, stating that it is one of the many “frivolous” suits it receives. Coinbase shares have gone downhill since the company went public, currently trading at around $50, down 85% from the day it went public.