Coinbase Executives Sued for Allegedly Selling Stock Ahead of Bad News

Because Coinbase went public through a direct listing rather than a traditional public offering, the board and executives did not impose trading restrictions, the lawsuit alleges

article-image

Coinbase CEO Brian Armstrong | Source: TechCrunch "775208327GB00107_TechCrunch" (CC license)

share

A Coinbase investor filed a complaint against current and former executives and board members, including CEO Brian Armstrong and Marc Andreessen. 

The lawsuit alleges that Armstrong, Andreessen, co-founder Fred Ehrsam, board members Kathryn Haun and Fred Wilson sold a collective $2.9 billion of stock in connection with the direct listing “all the while in possession of material, non-public information.”

“The Board knew that insiders had access to material, non-public information. Indeed, the very same access to MNPI is why the Board prohibited directors and officers from participating in the Secondary Trading Program,” the lawsuit claims.

Adam Grabski, the investor who derivatively filed the lawsuit on behalf of Coinbase, bought shares on the day the exchange went public. 

While parts of the lawsuit remain redacted, Grabski alleges that the company caused fee compression with the rollout of Coinbase Pro. 

Following the company’s public debut in 2021, analysts quickly noted that the reliance on transaction fees was concerning. At the time, 96% of Coinbase’s revenue came from transaction fees.

The exchange announced last June that it was sunsetting Coinbase Pro and replacing it with Coinbase Advanced Trade.

According to Coinbase, however, users will see the “same low volume-based fees as Coinbase Pro and do not need a subscription fee to use this feature.” Last year, Armstrong assured investors that the exchange is, over time, shifting revenue away from trading fees. 

But just two weeks after the direct listing, the board met and discussed pricing, according to the lawsuit. They reportedly acknowledged “traditional brokerages have faced dramatic fee compression.”

Ultimately, the lawsuit seeks the defendants to return the “ill-gotten gains” realized through their trades to Coinbase.

“As the most popular and only publicly traded crypto exchange in the US, we are at times the target of frivolous litigation,” a Coinbase spokesperson said in an email to Blockworks. “This is an example of one of those meritless claims.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research

article-image

A 40% allocation to crypto today is safer than a 1% allocation was in 2021, Ric Edelman argues

article-image

The wallet doesn’t have enough memory for more apps and features but should still function, the company says

article-image

The proof-of-work L1 is betting on parallel-chain scaling, low fees, and a $50 million grant program to lure Solidity developers and tokenized RWA issuers

article-image

Sponsored

Injective is not waiting for the future of finance. It is bringing it directly to us, today.

article-image

Bitcoin has been bullish for nearly 1,000 days

article-image

Robinhood announced that it’s building an L2 and also plans to launch staking for US users