The judge ruled that the $2.9 billion insider trading lawsuit involving Coinbase CEO and several other directors should proceed.

A Delaware judge has ruled that a shareholder lawsuit against several directors of Coinbase Global Inc., including venture capitalist Marc Andreessen, can proceed with insider trading allegations, after an internal investigation found no wrongdoing on the part of the defendants. Shareholders of the crypto platform filed the lawsuit in 2023, accusing directors, including CEO Brian Armstrong, of using confidential information to sell more than $2.9 billion worth of stock when the company went public in 2021, thus avoiding losses of more than $1 billion. According to the shareholder complaint, Armstrong, who has led Coinbase since its founding in 2012, sold $291.8 million worth of stock. Judge Kathaleen St. J. McCormick on Friday dismissed a motion to dismiss the lawsuit filed by an internal committee investigating the matter, citing a conflict of interest on the part of one of its members. However, Judge McCormick stated that the directors are likely to ultimately prevail because the special litigation committee's report "painted a compelling narrative" supporting their defense. The derivative lawsuit filed by shareholders against Armstrong, Andreessen, and other executives centers on Coinbase's choice to become a publicly traded company through a direct listing rather than an initial public offering (IPO). A direct listing does not involve issuing new shares to raise capital, thus avoiding dilution of existing holdings and eliminating the need for lock-up periods preventing existing investors from trading their shares. The lawsuit alleges that Andreessen, a member of Coinbase's board of directors since 2020, sold $118.7 million worth of stock in the direct listing through his Silicon Valley venture capital firm, Andreessen Horowitz. The shareholders' lawyers allege that the directors, based on confidential valuation information, knew the company's stock was overvalued and therefore sold shares to avoid losses. The directors' lawyers deny that their clients engaged in insider trading. They argue that the shareholders, as plaintiffs, have failed to provide evidence that the defendants possessed material non-public information that prompted them to sell shares. (Bloomberg)