Coinbase is facing class action for unstable stablecoins GYEN and TerraUSD
The cryptocurrency exchange is accused, among other things, of not having done the due diligence, causing users to lose large sums due to the depegging of stablecoins.
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A class action lawsuit was filed against Coinbase on Thursday, alleging that the trading platform was negligent in listing the TerraUSD stablecoin and not revealing its financial relationship with Terraform Labs. This is the second ongoing class case against Coinbase. A lawsuit was filed last month in connection with the gyen depeg in November.
The lawsuit alleges that Coinbase was negligent for not conducting due diligence on Terraform Labs before listing TerraUSD and for misrepresenting the risk of an algorithmic stablecoin like TerraUSD. The lawsuit compares the stablecoin information provided by the Robinhood, Gemini, and Kraken trading platforms with coinbase’s and concludes that “instead of revealing terraUSD’s nature as uncorterized, algorithm-controlled, and highly risky, Coinbase passed it off as any stablecoin.”
The lawsuit also alleges that Coinbase Ventures, the company’s investment arm, was one of Terraform Labs’ largest funders , and that this was an additional motivation for the company not to disclose TerraUSD’s volatility.
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The plaintiffs and the community are represented by the law firms Milberg Coleman Bryson Phillips Grossman and Erickson Kramer Osborne. The latest study also represents the plaintiffs in a lawsuit filed against Coinbase and GMO-Z.com Trust on May 13, relating to the depegging of Japan’s GYEN stablecoin — pegged to the yen — in November.
GYEN rose in value, only to fall precipitously a week after being listed on Coinbase, causing the platform to block the accounts of some users. Several users lost money — “incalculable millions,” according to the lawsuit — as a result of the incident. The lawsuit alleges that GMO-Z.com failed in its duties to the plaintiffs and the community in several ways, starting with the design of the stablecoin.
It is claimed that Coinbase committed a negligent valuation, and that it did not adequately investigate GYEN before listing it, despite a reasonably foreseeable risk of depegging.