Coinbase Faces Fresh Data Breach Lawsuit After Shares Sink

The complaint was filed on May 22 in a Pennsylvania federal court, and it alleges that these omissions led to sharp drops in Coinbase’s stock price, resulting in shareholder losses. The breach was confirmed on May 15, and involved compromised internal systems, a $20 million extortion attempt, and the potential for $400 million in liability. Nessler’s suit is the first to explicitly link stock losses to the breach and includes claims related to a previously undisclosed £4.5 million fine by the UK’s FCA. Meanwhile, Binance scored a legal win in a separate BSV investor lawsuit, and fraud charges were dropped against Mango Markets exploiter Avraham Eisenberg—though he is still in custody on unrelated charges. New Lawsuit Hits Coinbase Coinbase and two of its top executives are facing a new proposed class-action lawsuit related to the company’s recent data breach and alleged non-disclosure of a regulatory violation. The suit was filed on May 22 in a Pennsylvania federal court by investor Brady Nessler, and it accuses the crypto exchange of causing shareholder losses by failing to properly disclose a user data breach and a past violation of an agreement with the UK’s Financial Conduct Authority (FCA). Nessler alleges that the dual revelations led to sharp stock price drops, including a 7.2% fall to $244 per share on May 15 after the data breach was made public. Although Coinbase shares recovered by 9% the next day, they dipped again on May 23, ending at $263 and fell further in after-hours trading. (Source: CourtListener ) The data breach was confirmed by Coinbase on May 15, and it involved bribed customer support agents and a $20 million extortion attempt after hackers accessed internal systems and obtained limited user account data. Coinbase warned that its potential liability could reach $400 million. The lawsuit by Nessler is reportedly the first to directly link investor damages to the stock’s reaction after the breach disclosure. However, it follows a wave of at least six lawsuits accusing Coinbase of mishandling the incident and failing to adequately protect user data. In addition to the breach, Nessler’s complaint also focuses on a $4.5 million fine levied by the FCA in July of 2024. The fine penalized Coinbase’s UK division for violating a 2020 voluntary agreement that restricted the firm from onboarding high-risk clients. The FCA found that Coinbase serviced over 13,000 such users despite the agreement. According to the lawsuit, this revelation caused Coinbase’s stock to drop more than 5%, closing at $231.52 on July 25 of 2024. Nessler claims that Coinbase failed to disclose the violation at the time of its public listing on Nasdaq in April 2021, which allegedly led to an inflated share price. Nessler argues that she would not have bought the stock had she known of the FCA breach. Coinbase, CEO Brian Armstrong, and CFO Alesia Haas are all named as defendants in the class-action suit, which seeks damages and a jury trial on behalf of all shareholders who purchased Coinbase stock between April 14, 2021, and May 14, 2025. Another class-action suit that was filed in Illinois on May 13 alleges Coinbase violated biometric data laws by not informing users about the collection, use, or retention of their biometric data. Binance Wins Round in BSV Class-Action Battle While Coinbase is falling deeper and deeper into legal trouble, the United Kingdom’s Court of Appeal recently partially dismissed a high-profile lawsuit brought by Bitcoin SV (BSV) investors against major cryptocurrency exchanges, including Binance, over allegations of conspiracy to delist the token in 2019. In a ruling that was issued on May 21, the court rejected claims from a subset of investors—referred to as “sub-class B”—who held BSV through the delisting period and sought over £8.9 billion in damages. These investors argued that the delisting deprived them of the opportunity to benefit from BSV potentially rising to the status of a top-tier cryptocurrency similar to Bitcoin or Bitcoin Cash. However, the court struck down what it described as a “foregone growth effect” theory, and held firm that BSV was not a unique digital asset without comparable alternatives. Master of the Rolls Sir Geoffrey Vos explained that investors had a duty to mitigate their losses, like by selling BSV or reallocating into other cryptocurrencies. The judgment stressed that damages must be assessed based on values shortly after the delisting and could not be inflated by speculative future gains. Investors could not claim losses that they could reasonably have avoided through market alternatives. The Court of Appeal also rejected arguments against the application of the “market mitigation rule,” maintaining that the principle is valid for freely tradable assets like BSV. The panel dismissed the idea that this issue should be left for trial and pointed out that losses from missed speculative gains are not legally recoverable, particularly when it comes to volatile cryptocurrency investments. Even in cases where holders were unaware of the delisting, the court said any recovery would be limited to the value of their holdings before the event and any measurable subsequent losses. Binance is also seeking to dismiss a $1.76 billion lawsuit that was brought by the FTX estate. In a motion filed on May 16, Binance argued that the suit is legally baseless and an attempt to deflect from FTX’s own internal fraud. Binance stated that FTX’s downfall was the result of mismanagement and deception under former CEO Sam Bankman-Fried, who has been convicted on multiple fraud charges. Fraud Charges Dropped Against Mango Exploiter Meanwhile, a US federal judge dropped major fraud and manipulation convictions against Avraham Eisenberg, the trader behind the $110 million Mango Markets exploit. This dealt a major blow to the government’s case. Judge Arun Subramanian ruled that the evidence did not support the jury’s conclusion that Eisenberg made materially false representations, and nullified convictions for commodities fraud and market manipulation. The judge also acquitted him of a third charge. Eisenberg was convicted in 2024 for inflating Mango’s MNGO token price by over 1,300% and draining the platform’s funds. He, however, argued that he simply exploited open, permissionless DeFi code. The judge sided with that defense by stating that the platform’s automated nature left no room for legal deception. Subramanian also found that the trial venue in New York was improper, as Eisenberg was operating from Puerto Rico and had no connection to the state. While Eisenberg still faces civil actions from the SEC and CFTC, and remains in custody, the Department of Justice must now decide whether to refile the vacated charges. Separate from the Mango Markets case, Eisenberg was sentenced to nearly four years in prison earlier this month after pleading guilty to child pornography charges.

Source: Coinpaper