Odaily Planet News: A judge in Delaware, United States, has ruled that a shareholder lawsuit against several directors of Coinbase Global Inc., including venture capitalist Marc Andreessen, for alleged insider trading may proceed. Previously, an internal investigation had concluded that the defendants had engaged in no wrongdoing.
The shareholders of this cryptocurrency platform filed a lawsuit in 2023, alleging that directors, including CEO Brian Armstrong, used confidential information to sell over $2.9 billion in company stock during its 2021 initial public offering (IPO), thereby 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.
On Friday, Judge Kathaleen St. J. McCormick rejected a motion to dismiss the case filed by an internal committee investigating the matter, because she found that one of the committee members had a conflict of interest. However, Judge McCormick indicated that the directors might ultimately prevail, as the special litigation committee's report "presents a compelling narrative" supporting their defense.
The derivative lawsuits filed by shareholders against Armstrong, Andreessen, and other executives primarily focus on Coinbase's decision to go public through a direct listing rather than an initial public offering (IPO). A direct listing does not involve issuing new shares to raise capital, and therefore does not dilute existing ownership, nor does it require imposing lock-up periods that prevent existing investors from trading their shares for a certain period.
The indictment states that Andreessen, who has served on Coinbase's board since 2020, sold $118.7 million worth of shares through his Silicon Valley venture capital firm, Andreessen Horowitz, during the company's direct listing. The lawyers representing shareholders allege that the directors sold the shares based on confidential valuation information, knowing the company's stock was overvalued, in order to avoid losses.
The lawyers for the directors denied that their clients engaged in insider trading. They argued that the shareholders, who are the plaintiffs, failed to provide evidence that the defendants possessed material nonpublic information and that it was this information that prompted them to sell their stocks. (Bloomberg)