Coinbase of clients have sued the exchange for promoting and trading crashed stablecoin GYEN. A report broke the news earlier today, noting that the lawsuit targets both Coinbase and stablecoin issuer GYEN, which has proven to be anything but stable.
According to report, Coinbase customers yesterday filed a class action lawsuit in federal court in northern California. The lawsuit alleges that Coinbase and Tokyo-based GMO-Z.com, the issuer of GYEN, misled investors about the stability of the token. As a result, investors suffered losses amounting to millions of dollars.
The complaint pointed out that GMO-Z.com had issued GYEN a 1:1 peg to the Japanese yen. However, the value of GYEN slipped below that of the Japanese yen in November last year after Coinbase listed and began trading it.
The complaint further noted that,
“Investors placed orders thinking that the value of the coin was, as advertised, equal to the yen, but the tokens they were buying were worth up to seven times more than the yen. Just as suddenly, the value of GYEN plunged again to the peg – dropping 80% in one day.
Coinbase blocked customers from trading GYEN after the crash
Following the 80% crash, Coinbase halted trading of GYEN. The complaint alleges that the exchange exacerbated the harm already caused by denying customers the opportunity to sell the asset. As a result, GYEN holders on Coinbase lost millions within hours.
The investors who filed the lawsuit requested to represent all of GYEN’s investors. However, they did not specify the amount of compensation they seek.
At the time of writing, GYEN is trading at $0.007732. This amount is equivalent to the trade level of the Japanese yen against the US dollar.
This news comes after Coinbase recently released its First Quarter 2022 Earnings Report. The report said the exchange’s net revenue fell 53% to $1.165 billion. Coinbase also posted a net loss of $430 million.
Additionally, Sophia Zaller, a crypto underwriter at Relm Insurance, discovered a declaration of bankruptcy in the report. The statement noted that Coinbase could treat customers as general unsecured creditors in the event of bankruptcy. Zaller added that it was a red flag.
New disclosure in today’s newspaper $COIN (Coinbase) 10-Q: 👀
“In the event of bankruptcy…..customers could be treated as our general unsecured creditors.” 🚩🚩🚩
— Sophia Zaller (@sophiamzaller) May 10, 2022
As a result, investors started withdrawing their funds from the exchange, which caused the price of COIN to drop sharply.