A Delaware judge has allowed a shareholder lawsuit accusing several Coinbase directors of insider trading to proceed, despite an internal investigation that cleared the executives of wrongdoing.

case, filed In 2023, a Coinbase shareholder alleged that the company’s directors, including CEO Brian Armstrong and board member Marc Andreessen, used confidential information to inflate losses of more than $1 billion by selling shares around the company’s public launch in 2021. Humans sold more than $2.9 billion in Ama stock, according to the complaint.

On Friday, Delaware Chancery Court Judge Kathleen St. J. McCormick denied a request to dismiss the case after an investigation by a special litigation committee formed by Queenbase, Bloomberg Law. Reported. While the judge noted that the committee’s findings presented a strong defense for the directors, he ruled that questions about a committee member’s independence were sufficient to keep the case alive.

The lawsuit centers on Coinbase’s decision to go public through a direct listing instead of a traditional initial public offering (IPO). Unlike an IPO, a direct listing did not include a lock-up period, which allowed existing shareholders to sell immediately, nor did it involve issuing new shares that could dilute ownership.

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Andreessen is accused of selling $118 million in Coinbase shares

Andreessen, who joined Coinbase’s board in 2020, is accused of selling about $118.7 million in shares through his venture firm, Andreessen Horowitz. Plaintiffs allege that the directors knew that Coinbase had increased in value and sold the stock to avoid subsequent losses.

Coinbase and the defendants have denied these allegations, arguing that they have no evidence that they acted on material undemocratic information. Coinbase reportedly told Bloomberg Law that it was “disappointed by the court’s decision” and vowed to continue to fight the “meritless claims.”

The lawsuit was put on hold last year while a special prosecution committee conducted a 10-month review. The committee ultimately recommended the termination of the case, concluding that the sale was limited and largely to provide sufficient liquidity for the direct listing. He also argued Coinbase’s share price closely tracked bitcoin (BTC) movements, rejecting claims that trades were driven by insider knowledge.

However, shareholders challenged the independence of the committee, pointing to the past business relationship between committee member Gokul Rajaram and Andreessen’s firm. McCormick agreed that the contacts raised legitimate concerns, but acknowledged there was no suggestion of bad faith.

Cointelegraph reached out to Coinbase for comment, but did not receive a response by publication.

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Coinbase faces fresh allegations of insider trading

Meanwhile, crypto-researchers claim that some traders could benefit from prior information of a token listing on Coinbase. The claims show that blockchain data and technical signals have been used to predict which assets the exchange is preparing to list, allowing some market participants to trade ahead of public announcements.