Coinbase Faces Mounting Legal Challenges: Regulatory Fines, Investor Lawsuits & Privacy Breaches

The cryptocurrency exchange Coinbase is currently navigating a complex legal landscape, facing a series of accusations ranging from misleading investors to alleged regulatory breaches and privacy violations. These ongoing legal challenges highlight the increased scrutiny financial regulators and users are placing on digital asset platforms.

Recent Investor Allegations and UK Regulatory Issues

In the latest development, Coinbase and its executive team are confronting a new class-action lawsuit. This legal action, initiated by investors, alleges that the company withheld crucial information and acted negligently, resulting in significant financial losses for shareholders. The plaintiffs claim that Coinbase provided false or misleading statements within its registration documents, specifically those related to its initial public offering (IPO) during the period from April 14, 2021, to May 14, 2025.

A central point of contention in this lawsuit revolves around Coinbase’s UK subsidiary, CB Payments Limited (CBPL). It is alleged that CBPL failed to disclose a violation of an agreement with the UK’s Financial Conduct Authority (FCA). This agreement reportedly prohibited the provision of services to high-risk clients. Despite this restriction, CBPL allegedly serviced over 13,000 such customers, leading to a substantial fine of £3.5 million (approximately $4.5 million).

Following the announcement of this regulatory penalty, Coinbase’s stock experienced a decline of more than 5%. The investors involved in the lawsuit contend that the company should have disclosed these potential risks much earlier, as they significantly impacted the stock’s value and their investments.

Broader Legal Landscape: Securities and Data Breaches

Allegations of Unregistered Securities Sales

This is not the first time Coinbase has faced significant legal challenges. In the past year, the platform was accused of illegally selling unregistered securities, including tokens such as Solana (SOL), Polygon (MATIC), and Near Protocol (NEAR), among others. These lawsuits posited that the crypto platform operated as a securities broker without the necessary regulatory registration, a claim that continues to be a point of contention within the evolving digital asset regulatory framework.

Data Breach and Biometric Privacy Concerns

Adding to its legal woes, Coinbase has also been subject to two separate class-action lawsuits stemming from a recent data breach. This security incident, initially identified by crypto analyst ZachXBT in March and later acknowledged by the exchange in May, reportedly led to user losses reaching up to $400 million. The lawsuits allege inadequate security measures and a failure to protect user assets.

Furthermore, residents of Illinois are suing Coinbase over alleged violations of the state’s Biometric Information Privacy Act. This particular lawsuit asserts that the platform unlawfully collected biometric data from its users, raising significant questions about data privacy and the handling of sensitive personal information within the cryptocurrency sector.