Coinbase Secures Complete Dismissal of Putative Class Action Concerning its Listing of the Digital Asset UST

Paul, Weiss achieved a significant victory for publicly traded cryptocurrency exchange platform Coinbase when the U.S. District Court for the Northern District of California granted in full Coinbase's motion to dismiss a putative class action concerning Coinbase's listing of the algorithmic stablecoin UST.

In his second amended complaint filed in March 2024, the plaintiff alleged that Coinbase Inc., and its parent, Coinbase Global, Inc., misrepresented the nature and stability of UST, including by categorizing it as a "stablecoin," and that the plaintiff suffered losses when the value of UST dropped below $1.00 USD in May 2022. The plaintiff also claimed that Coinbase was negligent in failing to do appropriate testing and due diligence on UST before listing it for sale on its platform. The plaintiff asserted nine state law causes of action, comprising claims for negligence, negligent misrepresentation, and violations of various consumer protection and securities statutes.

In its motion to dismiss, Coinbase argued, among other things, that the plaintiff's negligence-related claims were barred by the economic loss rule, that Coinbase had not made any actionable misrepresentation or omission, and that the plaintiff had failed to adequately allege any violation of the California securities laws because he did not allege that he was in privity with Coinbase. Coinbase also asserted that the plaintiff's unjust enrichment claim was barred because the parties were in contractual privity and that the plaintiff could not sustain his Consumer Legal Remedies Act (CLRA) claim because the CLRA does not apply to digital assets.

U.S. District Judge Maxine Chesney accepted Coinbase's arguments and dismissed all nine of the plaintiff's claims. Most significantly, the court agreed that the plaintiff had pled himself out of court by relying on materials in his complaint that showed that a reasonable consumer would not have been misled by Coinbase's statements.

The Paul, Weiss team included litigation partners Meredith Dearborn, Randy Luskey and Paul Brachman.