Delaware Judge Allows Coinbase Lawsuit to Move Forward Over Insider Trading Claims

Highlights:

• The Coinbase lawsuit will continue after a Delaware judge declined to throw out the insider trading case.
• The judge allowed the case to proceed despite an internal review that cleared Coinbase directors.
• Coinbase is facing separate shareholder and regulatory cases alongside the Delaware lawsuit.

A Delaware judge ruled that a shareholder lawsuit accusing directors of Coinbase of insider trading may proceed. The decision rejected a motion to dismiss the case at this stage. The ruling came after an internal investigation had cleared the directors of wrongdoing. The court said the lawsuit met the threshold to continue.

A Delaware judge ruled Friday that a shareholder lawsuit alleging insider trading against several Coinbase Global Inc.

Coinbase founder and CEO @brian_armstrong ,who has led the crypto exchange since 2012, sold $291. 9 million in stock during Coinbase’s 2021 direct listing (a… pic.twitter.com/jxo49odeYG

— Degen Kid (@DegenKid4) January 31, 2026

The lawsuit was filed in 2023 by a Coinbase shareholder. It alleges that senior executives sold shares while holding confidential company information. The complaint names chief executive Brian Armstrong and board member Marc Andreessen. It claims directors sold more than $2.9 billion in shares around the 2021 direct listing.

According to the filing, those sales helped insiders avoid losses exceeding $1 billion. The complaint states that Armstrong sold about $291.8 million in stock. It also alleges that Andreessen’s venture firm sold roughly $118.7 million. The plaintiff argues the timing of the sales was not coincidental.

The main argument revolves around valuation data. The lawsuit claims that directors possessed nonpublic information that indicated that the shares were overvalued. It states that they sold shares before the disclosure of that information. The filing claims that this behavior violated fiduciary responsibilities to shareholders.

Coinbase did not use an IPO and went public through a direct listing instead. There was no lockup period in the structure. Current shareholders would be able to sell shares instantly. The lawsuit claims that this structure facilitated the purported trading activity.

Coinbase Lawsuit Grows as Shareholders Raise Disclosure Concerns

In response to the accusations, Coinbase in late 2023 constituted a special litigation committee. Two directors who did not sell shares were on the committee that carried out a ten-month investigation of the allegations. The committee later recommended ending the lawsuit.

The committee concluded the allegations were deficient. It said the share sales aimed to support liquidity during the direct listing. It found no evidence that confidential information influenced the trades. The report also stated that Coinbase’s share price closely tracked Bitcoin price movements.

Coinbase relied on the findings to seek dismissal. However, Delaware Chancery Court Judge Kathaleen St. J. McCormick declined that request. She said the report presented a compelling narrative supporting the directors’ position. She also said questions about independence prevented dismissal. The plaintiff challenged one committee member’s independence. The challenge cited prior business ties with Andreessen’s firm. The judge said those connections raised legitimate concerns. She noted no allegation of bad faith.

While the Delaware case proceeds, Coinbase has faced additional shareholder lawsuits tied to disclosures. In May last year, shareholder Brady Nessler filed a class action in Pennsylvania federal court. The lawsuit followed Coinbase’s disclosure of a data breach and an alleged breach of an agreement with the UK regulator.

The filing claims the disclosure triggered a sharp decline in the stock price. In February last year, a separate shareholder lawsuit was filed in New Jersey federal court. That complaint alleges Coinbase failed to disclose bankruptcy risks and the treatment of customer assets.

Other Legal Battles Show a Mixed Picture for the Exchange

The ruling allows the case to move forward but does not determine the merits of the insider trading claims. The judge said dismissal was not appropriate at this stage. She also indicated that the directors may ultimately prevail later in the litigation.

In separate matters, Coinbase disclosed that the U.S. Securities and Exchange Commission agreed to discontinue its case against the exchange. The decision remains subject to commissioner approval. The agreement includes no fine. It also includes no finding of misconduct. Coinbase announced the update through a regulatory filing.

Coinbase has also filed lawsuits against Michigan, Illinois, and Connecticut. The cases challenge state actions related to prediction markets. Coinbase argues the states exceeded their authority under federal law. The company has asked federal courts to clarify oversight boundaries.

MAKE THAT 3 LAWSUITS!

Coinbase also sued the Connecticut Attorney General and the Michigan Attorney General over their efforts to rein in prediction markets. 10 states are now in litigation with prediction market platforms. IL and MI are the latest entrants. https://t.co/xLfhx1z6XO pic.twitter.com/2EiE94tJrl

— Daniel Wallach (@WALLACHLEGAL) December 19, 2025