Another electronic stable coin loses its peg, customers sue crypto exchanges
The stable-coin crisis shows no sign of abating. After losing millions of dollars, customers sued Coinbase alleging that the exchange “scammed” about the stability of Gyen, the stablecoin pegged to the Japanese Yen.
On May 13, Kenneth Donovan and Hussien Kassfy filed a lawsuit against the largest cryptocurrency exchange in the US for misleading customers about the stability of the Gyen. Given the large number of victims, this could turn into a class action.
They accused Coinbase and GMO-Z, the issuer of the Gyen, of knowing in advance that the coin’s anchor rate was vulnerable and of hiding this information from investors.
Shortly after Coinbase started allowing Gyen trading this past November, the Ethereum-based token lost its peg. Its price rallied several times against the Japanese currency before turning sharply lower.
The exchange subsequently froze customer accounts and disabled transactions related to the stablecoin, citing technical reasons and unusual market conditions.
The lawsuit states that “investors believed that the value of the coin was, as advertised, pegged to the yen, but that the tokens they purchased increased sevenfold against the target currency, prior to the sudden surge.” suddenly plummeted back to the original rate, equivalent to a decrease of 80% in 1 day”.
“As the value of the Gyen returned to its peg, Coinbase added to the damage by limiting the ability of many customers to sell assets, then abruptly suspended all relevant transactions without giving any information. give an explanation”.
As a result, those who invested in Gyen lost “undisclosed millions of dollars” in just a few hours, and they claim damages.
Donovan spent about $335,000 to buy 38 million tokens but didn’t know that Gyen lost its peg to Yen and dropped 80% in value within hours of matching. Meanwhile, Kassfy bought 13 million tokens at a cost of around $118,000 and lost 40%.
Coinbase had a rough week as stocks plummeted amid a red hot crypto market. Shares of the company fell as much as 26.40% after the disappointing first-quarter earnings report was released on May 11, and the full-week decline was 43%.
GMO-Z Trust, Coinbase Global and Coinbase Inc are all named in the lawsuit filed in the Northern District Court of California. Both companies did not comment on the case.
Vinh Ngo (according to Yahoo Finance)
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