The Real Reason Investors Aren't The Only Ones Suing Coinbase

In October 2025, a federal judge squashed Coinbase's attempt to completely dismiss a lawsuit shareholders filed against the cryptocurrency exchange. Reuters reports that the plaintiffs accused Coinbase of minimizing risks about a pending enforcement action by the U.S. Securities and Exchange Commission and failing to warn customers that they could lose their deposits if Coinbase ever went bankrupt.

This means that shareholders, led by Swedish pension fund Sjunde AP-Fonden, could continue to pursue damages for stock prices tanking on several occasions in recent years. In May 2022, stock prices dropped 26% when the company decided to finally disclose that customers could lose their deposits if Coinbase ever went bankrupt. The following year, the stock dropped 12% when the SEC sought civil damages for not trading cryptocurrency tokens as securities as required by federal regulations at the time. However, shareholders can no longer sue based on group-published documents like press releases that don't show how specific Coinbase executives may have committed fraud.

The dismissal of some charges was enough for Coinbase. In a statement, the company celebrated the judge's ruling as a "significant step forward," according to Reuters. But the shareholders' case is not the only major litigation Coinbase will face. It's also dealing with at least one class-action lawsuit on behalf of its customers related to a security breach, as well as a separate legal action by the State of Oregon.

In May 2025, San Juan, Puerto Rico-based law firm Milberg filed a class-action lawsuit on behalf of nearly 70,000 Coinbase customers adversely impacted by a security breach. The leak may have caused up to $400 million in damages and the theft of customers' Social Security numbers, banking info, and transaction histories.

Coinbase also disclosed that the breach was initiated by its own contractors and employees who were based outside of the U.S. and were bribed by the criminals. In a blog post, Coinbase stated that it enhanced its security after the incident, was working with law enforcement, and offered a $20 million reward — the same amount the perpetrators tried to extort from the company — for anyone with info that will lead to the arrest and conviction of the alleged hackers.

But the class-action security breach complaint, Allen Shakib vs. Coinbase Global, alleges that a cryptocurrency exchange business with $468 billion in trading volume and 100 million users should have done more to protect its clients. As Milberg noted on its website, hackers stole $1 billion from cryptocurrency exchanges just in 2023. And while that figure pales in comparison to the $1.5 billion stolen from a single Dubai-based exchange in February 2025 in a huge heist the FBI says involved North Korea, it's certainly been enough to concern Coinbase's potential users and investors.

As for the SEC's legal action against Coinbase? The case was dropped by the Trump Administration in February 2025. Yet, two months later, Oregon Attorney General Dan Rayfield filed his own suit against the cryptocurrency exchange for allegedly trading unregistered securities that caused huge losses to Oregon residents and encouraged huge crypto scams like pump-and-dump and Ponzi schemes. Rayfield also said, via a press release, that it was the states' responsibility to put legal pressure on Coinbase if the federal government wasn't going to.

In response, Coinbase Chief Legal Officer Paul Grewal sent a 14-page letter to the Department of Justice to move against state-level enforcement actions against cryptocurrency companies and to urge Congress to "step in and enact broad preemption provisions." As Grewal put it in an X post, "When Oregon can sue us for services that are legal under federal law, something's broken. This isn't federalism — this is government run amok."

Problem is, the rules of cryptocurrency are as murky as where cryptocurrencies get their value. And with Senate Republicans and Democrats at loggerheads over a bill on how cryptocurrencies should be regulated, those rules may remain cloudy for the foreseeable future.