In a recent turn of events, Coinbase CEO Brian Armstrong’s sale of $1.8 million worth of company shares just a day before the U.S. Securities and Exchange Commission (SEC) announced a lawsuit against the cryptocurrency exchange has sparked controversy and speculation within the crypto community. While some observers raised concerns about potential insider trading, a Fox Business journalist has dismissed these claims, pointing out that the sales were pre-planned in compliance with SEC regulations.
The SEC lawsuit alleges that Coinbase operated as an unregistered broker, exchange, and clearing agency, and it further contends that the company’s staking program qualifies as an unregistered securities offering. Coinbase has publicly stated its intention to defend itself vigorously in court against these allegations.
According to data from Dataroma, Armstrong sold 29,730 Coinbase shares in eight transactions on June 5, with the selling prices ranging between $56.70 and $63.79. This news, coupled with the subsequent SEC lawsuit announcement on June 6, caused a significant drop in Coinbase’s stock price, with shares plummeting by over 15% to less than $50. At the time of writing, the stock had slightly recovered to $54.90, marking a 3.22% decline from Armstrong’s lowest selling price.
The timing of Armstrong’s stock sales, just prior to the SEC lawsuit, has led to speculation that he may have had prior knowledge of the impending legal action. However, Eleanor Terrett, a journalist from Fox Business, has dismissed these concerns, noting that the sales were executed in accordance with the SEC’s Rule 10b5-1, which allows company insiders to establish pre-determined plans for selling stock, including specific details such as price, quantity, and date. Insiders using this rule must also certify that they are unaware of nonpublic information.
Terrett further explained, “Setting a sale to happen on the 1st Monday of the month/start of the 3rd fiscal quarter, I’m told, isn’t too unusual.” This statement suggests that Armstrong’s sales were part of a predetermined plan established as early as August 2022, well before the SEC lawsuit became public knowledge.
The controversy surrounding Armstrong’s stock sales highlights the delicate balance between pre-planned trading arrangements and the appearance of impropriety. While the transactions may have been conducted in accordance with established rules, the close proximity of the sales to the SEC lawsuit announcement has raised eyebrows within the cryptocurrency community.
As the legal proceedings unfold, Coinbase will face the challenge of defending itself against the SEC’s allegations, while Armstrong’s stock sales will likely continue to be scrutinized for any potential improprieties. The outcome of these events will undoubtedly have implications for both Coinbase and the broader cryptocurrency industry, further emphasizing the need for transparency and adherence to regulatory standards.
