(Bloomberg) — Coinbase Global Inc. was sued over its role in the promotion and trading of a stablecoin cryptocurrency that allegedly turned out to be “anything but.”
The digital asset trading platform and the issuer of the GYEN token were accused of misleading investors about its stability, leading to millions of dollars in losses, according to the proposed class-action complaint filed Thursday in federal court in northern California.
The complaint came a day after Coinbase shares and bonds plunged to new lows, signaling investor skepticism about the prospects of the crypto exchange in a worsening bear-market.
Read More: Coinbase Tumbles to Record Lows as Crypto Meltdown Deepens
Unlike Bitcoin, stablecoins are backed by hard assets. GYEN, which was issued by Tokyo-based GMO-Z.com Trust Co., purportedly had its value pegged to the price of the Japanese yen.
But in November 2021, when Coinbase started trading GYEN, “the asset immediately came untethered from the yen,” according to the lawsuit.
“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,” according to the complaint. “Just as suddenly, the GYEN’s value plunged back to the peg — falling 80 percent in one day.”
When the price plunged, Coinbase froze trading of the asset, “compounded the harm by restricting many customers’ ability to sell the asset,” the investors said. As a result, purchasers of GYEN “collectively lost untold millions in a matter of hours.”
Coinbase and GMO-Z didn’t respond to requests for comment late Thursday.
The investors are asking to represent a class of GYEN purchasers and are seeking unspecified damages.
The case is Donovan v. Coinbase Global Inc., 22-cv-02826, U.S. District Court, Northern District of California (San Francisco).
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