Coinbase, the largest U.S. crypto exchange, defeated claims covering 99.97% of the trading at issue in a customer lawsuit, although the case will continue over at least $178 million in token sales the company filled from its own inventory.
U.S. District Judge Paul Engelmayer in Manhattan on July 30 dismissed claims involving "matched" trades, in which Coinbase paired one customer's order with another's. Those transactions represented 99.97% of the disputed volume.
- However, Engelmayer allowed the proposed class action to continue over at least $178 million of "inventory" transactions, in which Coinbase supplied tokens it already owned, according to Reuters' review of the ruling.
The customers allege that Coinbase illegally sold more than 60 unregistered securities, including XRP and DOGE. The ruling doesn't determine whether those tokens are securities or whether Coinbase is liable.
According to a July 16 court presentation reviewed by The Coinformer, Coinbase said it filled orders from its inventory in two circumstances:
- When its advanced trading platform suffered an unexpected outage or delay.
- When an order fell below a token's minimum trade size.
The exchange said an automated system supplied tokens from "operational inventory" held "primarily to pay gas fees," the blockchain charges incurred when moving crypto.
Coinbase also said the system didn't select trades based on expected profit or loss and that it obtained the tokens through its OTC desk.
Those details proved crucial to determining whether Coinbase was the legal seller as Engelmayer found that the exchange didn't sell tokens in matched transactions because ownership passed directly between customers.
Coinbase said inventory fills accounted for roughly three of every 10,000 trades and became less frequent over time.
The surviving $178 million represents sales volume, not damages or established customer losses. No customer class has been certified, while public filings don't disclose how many users or individual tokens account for those transactions.