Coinbase Faces Lawsuit for Insider Info. and Privacy Violations

A Coinbase insider has recently filed a new lawsuit naming Coinbase (NASDAQ: COIN) insiders including Chairman and CEO Brian Armstrong for using insider information to avoid $1 billion in losses during the stock’s public listing two years ago.

The investor filed the complaint on Monday, May 1, in Delaware Chancery Court. Furthermore, the investor argues that the company’s board went for direct listing instead of a typical public listing through an initial public offering. Also, Coinbase rapidly sold off $2.9 billion in stock before Coinbase management later revealed: “material, negative information that destroyed market optimism from the company’s first quarterly earnings release forward”.

In the derivative complaint filed in the Delaware court, the investor seeks the return of “ill-gotten gains” from Coinbase co-founder Brian Armstrong. The lawsuit also names other Coinbase executives along with the co-founder of VC giant Andreessen Horowitz.

Coinbase and Customer Privacy Violations

On Monday, there was another lawsuit filed against Coinbase in federal court in San Francisco. The lawsuit accesses Coinbase for collecting fingerprints and face templates of customers for violating Illinois’ biometric privacy law.

The lawsuit mentions that Coinbase harvested facial data from government-issued IDs and selfies that customers uploaded during the signup process. It also notes that Coinbase harvested the fingerprint data after customers logged into their accounts using fingerprint-scanning technology.

As per the landmark Illinois Biometric Information Privacy Act, companies need to take customers’ consent before collecting biometrics. They also need to inform customers how long they intend to keep the information.

The complaint notes: “Coinbase has created, collected, and stored thousands of ‘face templates’ – highly detailed geometric maps of the face – and fingerprints from countless Illinois residents”.

The lawsuit adds that Coinbase’s collection and storage of this data would expose users to “serious and irreversible privacy risks,” such as identity theft in the case of a data breach.

The development comes at a time when Coinbase and the U.S. SEC are involved in a legal battle. Coinbase recently slapped a lawsuit on the SEC for delaying the rulemaking petition and not offering enough clarity on crypto regulations.

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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