Coinbase Faces Shareholder Legal Action Over Breach and UK Fine
Coinbase, one of the largest cryptocurrency exchanges in the world, is once again under legal pressure—this time from its own investors.
The legal filing, brought by shareholder Brady Nessler in a Pennsylvania court on 22 May, alleges that Coinbase and two of its senior executives did not properly inform investors about a data breach and a regulatory breach involving its UK operations. These events, according to Nessler, triggered a significant fall in the company’s stock price, causing substantial financial losses to those holding shares.
Image 1: Coinbase faces class action lawsuit (Source: Digital Watch Observatory)
Data Breach Leads to Stock Dip
Earlier this month, Coinbase revealed it had suffered a data breach following an attempted extortion incident. According to the company’s own report on 15 May, a group managed to bribe some employees in its customer support department. This allowed them to access internal systems and obtain a limited amount of user data.
Coinbase disclosed that the cost of addressing the situation could reach up to $400 million. The announcement had an immediate impact on the market, with Coinbase shares dropping by more than 7 percent to $244. Although the stock regained ground the following day, closing 9 percent higher at $266, Nessler claims that many investors had already suffered losses from the initial decline.
Nessler, who filed the complaint on behalf of shareholders, argues that the company’s failure to prevent the incident and the way it was disclosed to the public damaged investor confidence and directly led to the price drop.
UK Fine Over Past Misconduct Resurfaces
The lawsuit also brings up a separate issue involving a fine issued by the UK’s Financial Conduct Authority (FCA) in mid-2024. Coinbase’s UK division had agreed in 2020 to a voluntary arrangement with the FCA, which restricted it from accepting customers considered to be high-risk. However, the company reportedly breached that agreement by providing crypto services to over 13,000 users who fell into that category.
As a result, the FCA imposed a fine of £3.3 million—approximately $4.5 million at the time. Following the announcement of this penalty on 25 July 2024, Coinbase shares again declined by more than 5 percent, closing at $231.52.
Nessler contends that the company failed to inform investors of this breach when it listed on the Nasdaq exchange back in April 2021. According to her, this omission gave a false impression of the company’s compliance record and operational transparency. She argues that if the information had been available to the public earlier, the market value of the shares would not have been as high, and she would not have made the decision to invest.
The case names Coinbase’s CEO, Brian Armstrong, and its Chief Financial Officer, Alesia Haas, as co-defendants, alongside the company itself. Nessler is seeking damages and has requested a jury trial for those who purchased Coinbase stock between 14 April 2021 and 14 May 2025.
Image 2: Coinbase (Source: Bankrate)
Broader Legal Challenges Mount
Coinbase has been dealing with increasing legal issues in recent weeks. Following the data breach disclosure, at least half a dozen lawsuits have been filed against the firm, mostly centred on allegations that it failed to protect sensitive user information and did not adequately respond to the breach.
One separate legal action, filed in the state of Illinois on 13 May, accuses Coinbase of mishandling biometric data. This case claims the company collected and stored sensitive personal data—such as facial recognition or fingerprint information—without proper written notice or a clear explanation of how long the data would be kept or used.
So far, Coinbase has not issued any public statements in response to the growing number of lawsuits.
As the legal pressure builds, the company is facing a challenging road ahead. With investors now joining the list of those taking legal action, Coinbase must manage not only regulatory scrutiny and customer trust but also questions about its corporate governance and disclosure practices.
The final outcome of these legal proceedings could have significant implications for how crypto firms communicate with shareholders and regulators in future. For now, all eyes remain on the courts to determine whether Coinbase failed to be transparent at key moments—and what consequences that may bring.
