Paul Engelmayer is a United States District Court Judge for the Southern District of New York. He is making headlines as he is the one denying claims in a class action lawsuit proposed by investors against Coinbase. Indeed, the latter claimed that the crypto giant sold them securities that had not been registered. Find out the crux of this case.
The real problem
A lawsuit was filed in the US District Court on March 11. This stipulated that 79 of the tokens listed on Coinbase appeared as securities sold without any conforming record. In addition, customers complained thatthey had not been warned of the risks to which they were exposed.
Additionally, it is important to remember that this lawsuit brought charges under the terms of the Securities Act of 1933. This was also done under the Exchange Act of 1934. To identify each token, it was a question of use the Honey test drawn up by the Supreme Court of the United States in 1946. Moreover, it should be noted that the plaintiffs pleaded for each token taken separately. But Judge Engelmayer did not see it that way.
The reasons for the rejection of the class action
The magistrate during his analysis considered that the tokens were precisely titles. Moreover, he didn’t want to go further by questioning the Honey-based claims. According to him, the Coinbase user agreement discredits the assertion of the complaining customers.
In other words, the judge argues that Coinbase was not the actual trading representative of the disputed tokens. On the one hand, Coinbase would not have solicited a sale according to a precise legal definition. Reason why, the class action, under the Securities Act, was purely dismissed.
According to the judge, the Exchange Act claim alleged the presence of a contract that involves a prohibited transaction. One thing is certain, the plaintiffs’ lawyers have certainly realized the flaw in their argument. This is why they are not going to appeal this decision by Paul Engelmayer.
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