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Coinbase Wins Motion to Compel Arbitration, Staying Putative Class Action Over Stablecoin GYEN
- Client News
- January 9, 2023
Paul, Weiss achieved a victory for publicly traded cryptocurrency exchange platform Coinbase Global, Inc., when the U.S. District Court for the Northern District of California granted Coinbase’s motion to compel arbitration and stay a putative class action concerning the stablecoin GYEN.
In their lawsuit filed in May 2022, investors allege that Coinbase and a subsidiary of Japanese conglomerate GMO Internet Group promoted GYEN as pegged one-to-one in value to the Japanese yen and that the defendants hid GYEN’s volatility risks from purchasers. They also claim that Coinbase misled investors through its marketing materials regarding the coin’s stability, allegedly leading to millions of dollars in losses for the class members.
In its motion to compel arbitration, Coinbase pointed to the arbitration provision in the user agreement, arguing that the agreement “expressly delegates ‘gateway’ arbitration questions to the arbitrator—including questions about the enforceability, scope, and interpretation of the arbitration agreement itself.” The plaintiffs claimed that the delegation clause is inapplicable and unconscionable.
In its opinion, the court found that the delegation clause is clear and unmistakable, and therefore the court “must enforce that delegation ‘in the absence of some other generally applicable contract defense, such as fraud, duress, or unconscionability.’” The court further agreed with Coinbase that the plaintiffs did not meet their burden of demonstrating that the delegation clause is unconscionable.