Customers of Coinbase have sued the exchange for promoting and trading GYEN, a defunct stablecoin. According to a report published earlier today, the lawsuit targets both Coinbase and the issuer of the GYEN stablecoin, which turned out to be anything but stable. Customers of Coinbase, according to the report, filed a class-action complaint in federal court in northern California yesterday. The lawsuit claims that Coinbase and GMO-Z.com, the token’s issuer based in Tokyo, deceived investors about the token’s stability. As a result, millions of dollars were lost by investors.
According to the complaint, GMO-Z.com released GYEN with a 1:1 peg to the Japanese yen. However, after Coinbase debuted and began trading GYEN in November of last year, its value fell below that of the Japanese yen.
The complaint further noted that,
“Investors placed orders believing the coin’s value was, as advertised, equal to the yen, but the tokens they were purchasing were worth up to seven times more than the yen. Just as suddenly, the GYEN’s value plunged back to the peg — falling 80 per cent in one day.”
Coinbase banned GYEN trading after the 80 per cent drop. According to the complaint, the exchange compounded the damage by denying clients the ability to sell the asset. GYEN holders on Coinbase lost millions in a matter of hours.
The plaintiffs in action want to represent all GYEN shareholders. However, they did not disclose the amount of compensation they were seeking. GYEN is currently trading at $0.007732 at the time of writing. This sum is equal to the current value of the Japanese yen against the US dollar.
This announcement follows the release of Coinbase’s Q1 2022 earnings report. The exchange’s net revenue dropped 53% to $1.165 billion, according to the report. Coinbase also suffered a $430 million net loss.
A crypto underwriter at Relm Insurance, a bankruptcy disclosure statement was also discovered in the report. According to the information, in the event of bankruptcy, Coinbase might regard consumers as general unsecured creditors. This, according to Zaller, is a red flag.
As a result, investors began to withdraw their assets from the exchange, causing COIN’s price to plummet.