A Delaware judge has permitted a shareholder lawsuit against Coinbase directors to move forward, despite an internal examination that found no wrongdoing among the executives. The lawsuit, initiated by a Coinbase shareholder in 2023, accuses several board members, including CEO Brian Armstrong and Marc Andreessen, of insider trading, alleging they capitalized on confidential information to avoid over $1 billion in losses by selling shares prior to the company's public listing in 2021.
The complaint highlights that the accused insiders sold over $2.9 billion in stock, with Armstrong himself selling around $291.8 million. On Friday, Judge Kathaleen St. J. McCormick of the Delaware Chancery Court denied a motion to dismiss the lawsuit, citing concerns about the independence of a member of the special litigation committee that investigated the claims. While the committee's findings were deemed a robust defense for the directors, the judge's ruling allows the case to continue.
Coinbase's unique decision to pursue a direct listing, which did not involve a lockup period for existing shareholders, is central to the allegations. The lawsuit had been on hold during a ten-month investigation by the committee, which ultimately recommended dismissal, asserting that the stock sales were intended to ensure liquidity and that the company’s share price was closely tied to movements in Bitcoin.