The recent accusations of insider trading against Coinbase CEO Brian Armstrong has sparked concerns among investors and industry experts. Armstrong sold nearly 30,000 shares of his company worth more than $1.7 million just two days before the Securities and Exchange Commission (SEC) initiated enforcement action against Coinbase.
Coinbase investors question CEO stock sale ahead of SEC complaint
Coinbase CEO Brian Armstrong has come under scrutiny after selling a whopping 29,730 common shares of his company on June 5, 2023, according to a Form 4 archived with the Securities and Exchange Commission. Armstrong made the sale in eight separate transactions, all on the same date, at an average price of $60.3 per share. This earned him more than $1.7 million in total.
It is speculated that Armstrong’s stock sale was a pre-planned transaction made before Coinbase’s shares plummeted from $63 a share to $44, a significant 30% drop. This has led to investor concerns about the possibility of insider trading or a planned stock sale by the company’s executives.
However, executives at publicly traded companies like Coinbase since 2021 often have to follow strict rules about when and how to trade their company’s stock.
They usually have to prepare a trading plan, which allows them to plan the sale of their shares well in advance, at times when they do not have inside information. The details of the plan, including the number of shares to be sold and when, must be predetermined and followed exactly.
If Armstrong’s sale came through as per his plan, the timing of the sale, just a day before the SEC lawsuit went public, would be a coincidence. However, some investors are still concerned about the optics of the sale and the possibility of insider trading.
Nevertheless, companies are typically bound by disclosure rules that require them to notify the public of significant events as soon as possible. The announcement of the SEC lawsuit likely followed these rules, and it’s possible the news coincided with Armstrong’s pre-planned stock sale.
Ripple’s SEC case could have far-reaching implications for exchanges
The ongoing SEC v. Ripple case has significant implications for the cryptocurrency industry, particularly companies like Coinbase and Binance. According to according to crypto-friendly attorney James Murphy, a ruling in Ripple’s favor by Judge Torres could undermine the SEC’s case against Coinbase and Binance.
Murphy believes that if Judge Torres rules that XRP tokens traded on secondary markets are not securities, it would weaken the SEC’s argument that Coinbase operates an unregistered stock exchange, broker-dealer, and clearing broker. The SEC claims that 13 tokens traded on Coinbase are securities, but if those tokens are found not to be securities, the SEC’s case would fall apart.
While a ruling by Judge Torres would not set a binding precedent in other cases, Judge Rearden, who is presiding over the Coinbase case, is a new judge and is working alongside Judge Torres in the same lower Manhattan court.
Murphy believes Judge Rearden will pay close attention to Judge Torres’ legal reasoning when deciding whether $XRP is a security, and could follow that reasoning when analyzing whether the 13 tokens named in the Coinbase complaint have securities are.
However, if Judge Torres rules that $XRP tokens are securities, the SEC could use that decision to argue that the judges presiding over the Coinbase and Binance cases should follow Judge Torres’ reasoning.
Featured image of Unsplash, chart from TradingView.com
