A securities lawsuit has been filed against Coinbase and its top executives for making “misleading claims.”

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Coinbase, one of the market’s leading cryptocurrency exchanges, is in the news after a shareholder filed a proposed securities class action lawsuit against it on Thursday over its Nasdaq listing. The plaintiff accused the company of misleading investors about its financial situation prior to going public, claiming that the stock’s price had plummeted since its April debut, contrary to the claims on its offering materials.

The class action, filed in California’s Northern District Court by law firm Scott + Scott, has named shareholder Donald Ramsey as the plaintiff in the class action, both individually and as a representative of other similar investors.

Ramsey claimed in his complaint that Coinbase failed to mention factors that could have influenced investor decisions at the time of its direct listing. Among them were its failure to communicate the need for a “significant cash injection” and the exchange platform’s vulnerability to “service level disruptions that were increasingly likely to occur as the company scaled its services to a larger user base.”

The investor is pursuing these claims under the United States Securities Act. The evidence for these claims came from publicly available information about Coinbase, such as regulatory filings with the Securities and Exchange Commission (SEC), company press releases, and analyst reports, among other things.

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Along with the company, other defendants named in the suit include CEO Brian Armstrong, CLO Paul Grewal, and other top executives and venture capital backers. Ramsey is representing a class of thousands of investors who purchased Coinbase’s Class A common stock based on the company’s offering materials when it went public.

Ramsey also claimed that once investors realised the company’s reality, its share price fell by nearly 10% over two trading sessions in mid-May, when Coinbase announced plans to raise $1.25 billion, but only through a convertible bond sale due to a lack of funds.

Furthermore, performance issues surfaced at the same time that network congestion revealed technical difficulties within the platform. According to the class action, such technical issues are damaging to the company’s reputation, and its valuation is dependent on its ability to provide traders with a reliable marketplace.

“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages.”

Understandably, reactions to the same were quick and vocal. Tulane Law School’s Ann Lipton was one of them, with the professor tweeting,

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