Coinbase Faces Allegations of Concealing Bankruptcy Risks

Coinbase shareholder Wenduo Guo has filed a lawsuit against the exchange and its executives, accusing them of concealing bankruptcy risks. This was reported by Cointelegraph, citing the lawsuit dated February 18.

According to the case materials, Coinbase failed to inform clients that their funds could become part of the bankruptcy estate if the company went bankrupt. In such a scenario, retail investors would become unsecured creditors, jeopardizing the safety of their assets.

The plaintiff also noted that prior to the IPO in April 2021, there were at least 75 instances of crypto exchange collapses, causing investors to lose access to their digital assets. Despite statements from Coinbase’s management, Guo claims the trading platform does not differ in terms of such risks.

He alleged that the company concealed facts about using corporate funds for its own trading operations. This practice, reportedly intended to offset falling cryptocurrency prices, carries significant risks.

The shareholder also recalled the lawsuit by the SEC against Coinbase from June 2023. At that time, the regulator accused the company of listing unregistered securities and lacking a brokerage license.

The plaintiff demands a jury trial, compensation for damages, and a review of the company’s corporate governance.

Defendants include Coinbase co-founder Fred Ehrsam, CFO Alesia Haas, COO Emilie Choi, and other executives and board members.

Back in December 2024 to January 2025, Coinbase clients lost over $65 million due to social engineering fraud. One victim reported a theft of approximately $850,000.