Allegations of insider trading have emerged against Coinbase CEO Brian Armstrong, causing concern among investors and industry experts.
Armstrong sold over $1.7 million worth of company shares just two days before the Securities and Exchange Commission (SEC) initiated enforcement action against Coinbase.
According to a Form 4 filed with the SEC, Coinbase CEO Brian Armstrong sold nearly 30,000 shares of the company’s Class A Common Stock in multiple transactions on June 5, 2023.
The transactions occurred at an average price of $60.3 per share, resulting in a total of over $1.7 million. The timing of the sale, just before a significant decline in Coinbase’s stock price, has raised concerns among investors about potential insider trading.
Pre-Planned Transactions: Publicly traded company executives, including those at Coinbase, are subject to strict rules governing their stock transactions.
These rules require them to establish pre-determined trading plans, allowing them to schedule stock sales in advance without access to insider information.
If Armstrong’s stock sale adhered to his pre-planned trading plan, the timing may be coincidental rather than indicative of insider trading.
Despite adherence to trading plan rules, some investors remain concerned about the optics of Armstrong’s stock sale and the potential appearance of insider trading.
The proximity of the sale to the public announcement of the SEC lawsuit raises questions, even though companies are obligated to promptly disclose significant events. It is possible that Armstrong’s pre-scheduled stock sale coincided with the SEC’s lawsuit announcement.
The ongoing Ripple case holds significant implications for the cryptocurrency industry, including Coinbase and Binance.
A favorable ruling for Ripple by Judge Torres could undermine the SEC’s case against these exchanges. If Judge Torres determines that XRP tokens traded on secondary markets are not securities, it weakens the SEC’s argument that Coinbase operates an unregistered securities exchange.
Judge Rearden, presiding over the Coinbase case, may consider Judge Torres’ legal reasoning when analyzing whether the tokens cited in the complaint are securities.