Coinbase Under Fire: Legal Storm Brews Over Delayed Data Breach Disclosure

Regulators sharpen knives as exchange stumbles on transparency—just as retail traders were starting to trust crypto again.

When the breach finally hit the headlines, Coinbase’s PR team scrambled faster than a DeFi yield farmer chasing the next pump. Too little, too late? The SEC certainly thinks so.

Bonus jab: At least the lawyers will get their cut before the next market downturn wipes out another cohort of diamond-handed bagholders.

Allegations of Rights Violations by Shareholders

The complaint accuses Coinbase of concealing a December 2024 attack for five months, despite knowing that involved personnel were bribed and attackers gained access to the personal and contact information of thousands of customers. Shareholders argue that the failure of “timely and full disclosure” artificially maintained the company’s market value. When the incident was revealed on May 15, Coinbase’s stock price dropped by 7.2% to $244 in one day. While the company initially estimated the breach’s potential costs to be between $180 million and $400 million, plaintiffs suggest these figures may be “incomplete or optimistic.”

Alongside the data leak, claims have emerged regarding Coinbase’s CB Payments unit in the United Kingdom allegedly violating an obligation agreement with the Financial Conduct Authority (FCA) established in 2020. The lawsuit faults the company for not disclosing this breach, effectively concealing regulatory risks and preventing investors from fully assessing both operational and legal risks. Over a five-year period, this “chain of deficient declarations” reportedly fostered a “misleading confidence” in Coinbase’s growth narrative among shareholders.

Alleged Breach of Compliance Commitments

Under the FCA agreement, CB Payments was required to segregate customer assets and implement additional oversight in transfer processes. Shareholders claim that the “silently breached compliance commitment” not only exposes Coinbase to pressure for compensation but also to potential future licensing restrictions. According to the lawsuit, tensions with international regulators could directly affect the exchange’s ability to maintain its cryptocurrency operations, thereby weakening long-term revenue projections.

Meanwhile, on May 23, Coinbase’s stock closed at $263.16, regaining some of its losses. However, the plaintiffs argue that this temporary recovery doesn’t mean the “concealed risks have been mitigated” and that compensatory decisions by the court could introduce additional pressure. Market analysts suggest that this process “could set a precedent” for transparency standards and regulatory relationships within the cryptocurrency exchange sector.