A Coinbase customer is suing the San Francisco-based exchange for $5 million for failing to properly secure customers’ accounts and “flouting” federal securities laws, among other allegations.
The lawsuit, filed last week and which represents over 100 people, claims that the biggest cryptocurrency exchange in the U.S. locked users out of their accounts for extended periods of time—harming them financially.
Filed in the U.S. District Court for the Northern District of Georgia, plaintiff George Kattula also alleges that Coinbase doesn’t disclose that the crypto assets on its platform are securities, which “boldly flouts federal and state laws.”
“Contrary to its representations, Coinbase does not properly employ standard practices to keep consumers’ accounts secure,” the lawsuit reads. “And Coinbase improperly and unreasonably locks out its consumers from accessing their accounts and funds, either for extended periods of time or permanently.”
The plaintiffs allege that the exchange crashed during times of market volatility—which does happen to crypto exchanges—making it difficult for the user to withdraw cash. “Coinbase’s user growth has outpaced its ability to provide the account services and protections it promises to consumers,” the lawsuit adds.
The lawsuit further claims that the plaintiff’s assets were “vulnerable to theft.”
America’s largest crypto exchange has been hit with a number of lawsuits from disgruntled customers lately. Earlier this month, the exchange asked the U.S. Supreme Court for an emergency intervention to send two recently filed lawsuits to arbitration.
Meanwhile, the SEC is currently investigating the company for allowing U.S. residents to trade unregistered securities, according to a Bloomberg report in late July.
The news followed civil and federal charges filed against a former Coinbase product manager who is accused of operating an insider trading scheme. In its complaint against the former Coinbase employee, the SEC claimed that the exchange currently lists several unregistered securities.