Coinbase, the largest cryptocurrency exchange in the United States by volume and its CEO, Brian Armstrong, is facing a new class-action lawsuit alleging investor deception into buying securities. The lawsuit is from customers who say the company’s business model was illegal. This lawsuit echoes one already faced by the company. 

The lawsuit, filed in California’s Northern District by law firm Scott+Scott, representing plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard from California and Florida, alleges that Coinbase’s digital asset sales knowingly violated state securities laws since the company’s inception.

In the filing, the plaintiffs asserted that Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM) are securities.

The complainants claim Coinbase admitted it is a “Securities Broker” in its user agreement, making digital asset securities sold by the exchange as investment contracts or other securities. The plaintiff also took aim at Coinbase prime brokerage as a securities broker/dealer.

The plaintiffs seek full rescission, statutory damages under state law, and injunctive relief through a jury trial. This lawsuit resembles another class-action suit alleging consumer harm from Coinbase’s sale of securities.

However, Coinbase argued that secondary crypto asset sales didn’t meet securities transaction criteria, disputing the relevance of securities regulations. The court examined various aspects, ultimately overturning some of the lower court’s decisions while upholding others.

Related: Coinbase's Base could make it the NVIDIA of DeFi

This new lawsuit is distinct from Coinbase’s highly publicized legal battle with the SEC, which also questions whether tokens sold on Coinbase should be classified as securities. Coinbase has recently filed an interlocutory appeal in response to a judge’s decision allowing the case to proceed.

In an April 26 filing in the U.S. District Court for the Southern District of New York, John Deaton, the crypto lawyer currently running a Senate campaign to unseat Elizabeth Warren, filed an amicus brief in support of a motion for interlocutory appeal on behalf of 4,701 Coinbase customers.

Coinbase reported a strong rebound in the first quarter of 2024, supported by an uptick in market performance and the launch of Bitcoin exchange-traded funds (ETFs). The exchange posted $1.6 billion in total revenue and $1.2 billion in net income for the first quarter, achieving $1 billion in Adjusted EBITDA — which measures a company’s earnings before interest, taxes, depreciation and amortization.

Magazine: Deposit risk: What do crypto exchanges really do with your money?