• D.C.
  • BXL
  • Lagos
  • Dubai
  • Beijing
  • SG
rotating globe
  • D.C.
  • BXL
  • Lagos
Semafor Logo
  • Dubai
  • Beijing
  • SG

In today’s edition, we look at a shareholder lawsuit accusing Coinbase executives and board members ͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
cloudy Los Angeles
cloudy New York
thunderstorms San Francisco
rotating globe
May 2, 2023


Sign up for our free newsletters
Liz Hoffman
Liz Hoffman

Hi from Los Angeles, and welcome back to Semafor Business, a twice-weekly look at the world of big money.

I’m in town for the Milken Global Conference, where 3,500 attendees gathered this week for the annual confab. More nakedly commercial than Davos and less celebrity-studded than DealBook, Milken is the financial world’s unabashed homecoming. It’s the smoke-filled back room, except it’s happening right out in the sun-drenched lobby of the Beverly Hilton.

The mood is not quite gloomy but cautious, though not as cautious as some think it ought to be. “People are too happy here,” noted Katie Koch, CEO of credit shop TCW. She predicted “some bad accidents” ahead in a “medium to hard landing” for the economy. The collapse of First Republic, the third U.S. bank failure this spring, hung over the crowd, too.

The investment du jour is clearly private credit, which has doubled since 2017, to $1.3 trillion. Proponents say it’s more disciplined than loans from banks, which ship the debt off their books as soon as they can, and wieldier than the bond market. Critics note declining lender protections and borrowers padding their earnings with fuzzy add-backs. The next year will be telling, but I’ll note that while recessions might sometimes be sparked by stock-market crashes, credit meltdowns sustain them.

Onto today’s big story: A new lawsuit essentially accuses some of Silicon Valley’s elite of insider trading in shares of Coinbase. The company’s CEO and CFO, along with venture capitalists Marc Andreessen, Fred Wilson, and Katie Haun, are among those who sold shares of the crypto exchange just after it went public, knowing its fees were falling and it would soon need to raise cash, the lawsuit alleges. Read on for more.


JPMorgan Chase CEO Jamie Dimon
Reuters/Brian Snyder

➚ BUY: JPMorgan Chase. The country’s biggest bank got even bigger thanks to its pre-dawn takeover of failed peer First Republic. The mega-bank’s stock gained 2% yesterday as CEO Jamie Dimon reprised his role as industry savior.

➘ SELL: Morgan Stanley. The New York-based lender (a natural buyer of First Republic; I’m puzzled why they sat it out) is undergoing its second round of layoffs in six months. The cuts, according to Bloomberg, will cull as many as 3,000 people from the bank’s Wall Street business of trading and dealmaking.

Semafor Stat

The share of Pacific Western Bank’s $29 billion in deposits that are insured as of April 24, up from just under half at the end of the year. Customers actually put $700 million in fresh deposits into the regional bank since March 31. But they did it in amounts under the $250,000 insurance cap, which the FDIC is now reexamining in a lengthy report released yesterday.

That has been of little comfort to investors. PacWest’s shares were down 30% in Tuesday morning trading, while rival Western Alliance’s stock fell 22%. The sale of First Republic may not have been the firebreak that regulators hoped.

Liz Hoffman

Silicon Valley elite accused of ditching Coinbase stock based on insider info


A new civil lawsuit accuses Coinbase directors and executives — a star-studded list of elite Silicon Valley investors including Marc Andreessen and Fred Wilson, along with the company’s CEO and its co-founder — of dumping shares soon after the crypto exchange went public, knowing it was likely to miss its financial targets.

The nine named defendants, who include Coinbase CEO Brian Armstrong and CFO Alesia Haas, sold $2.9 billion worth of stock in the week after the company’s market debut on April 14, 2021 and before it reported its quarterly earnings a month later, according to the shareholder lawsuit and confirmed by a review of the company’s securities filings.

The lawsuit, filed in Delaware court and unsealed on Monday, claims they avoided more than $1 billion in losses by selling when they did. Over the next few weeks, the company reported earnings that fell short of expectations and raised new money in a deal that diluted existing investors.

Between Coinbase’s listing on April 14 and April 22, Wilson sold $1.8 billion worth of stock, CEO Brian Armstrong sold $292 million, and Andreessen sold $119 million, the lawsuit and securities filings show.

Coinbase declined to comment.

Semafor/Joey Pfeifer


Coinbase’s market debut was a landmark event for the crypto industry, a sign that mature companies with solid management and sophisticated investors were replacing the Wild West of speculators and flim-flam artists. It was briefly valued at $100 billion on its first day of trading.

A month later, it announced its first quarterly earnings as a public company, falling short of analysts’ expectations. The company’s fees on each trade — the main way exchanges make money — had shrunk from 1.4% to about 1.2%.

The complaint cites internal board minutes and presentations, some of which are redacted, that show Coinbase’s executives and board members knew those fees were under pressure while they were selling their own stock.

Shares fell 2.5%, and lost another 13% over the next few days as Coinbase announced  a $1.25 billion in a convertible bond offering. (These bonds convert into stock, so they eventually make existing shares less valuable.) The day before the earnings announcement, shares closed at $265.10. By May 19, when it completed the bond offering, they closed at $224.80.


Coinbase clearly needed money when it went public. Internal board minutes cited in the lawsuit show directors and executives were aware of that months earlier, and it quickly went out to raise cash. So why didn’t it do a traditional IPO, which would have brought in hundreds of millions of dollars?

One reason could be that IPOs generally prevent insiders from selling their stock for a few months. These lockups are meant to instill confidence in investors that management is bullish on the company.

Instead, Coinbase did a direct listing, in which no new shares are floated but existing ones are simply listed on an exchange. There’s no rule against having lockups in a direct listing — Palantir included one when it went public in 2020 — but most don’t. (There’s no rule requiring lockups in traditional IPOs either, but underwriters demand them and investors expect them.)

That left Coinbase’s executives and venture investors free to sell, and sell they did. Nearly all of the trades by the defendants, who also include venture investor and former federal prosecutor Katie Haun, and Coinbase co-founder Fred Ehrsam, were conducted above the valuation that a consultant had placed on the company just before it went public, according to the lawsuit.


Coinbase pre-released some of its earnings figures on April 6, a week before it listed, projecting $1.8 billion of revenue and $1.1 billion, and it hit both numbers. Given that, it might be hard to argue that investors were in the dark during the period covered by the lawsuit.

And the fact that this case is being brought by a plaintiffs’ firm, not securities regulators, may also suggest there’s less here than meets the eye. Bernstein Litowitz is a serious firm with a string of big wins behind it, but the Securities and Exchange Commission presumably saw the trades when they were disclosed, and chose not to pursue a case.


  • The transcript of Coinbase’s 2021 first-quarter earnings includes some back-and-forth between Haas and an analyst about the exchange’s slipping fees. Coinbase charges less for larger trades, and the growing size of each transaction was crimping margins.

May Day: American Airlines pilots authorized a strike while Hollywood screenwriters began theirs today after talks broke down with their respective employers. This year has already seen the biggest U.S. work stoppage month since 2019: More than 67,000 workers went on strike in March.

Management and employees are fighting over a shrinking pie, as growth slows and inflation takes a bite out of both wages and corporate profits. French workers will take to the streets again next month to protest President Emmanuel Macron’s efforts to raise the retirement age, and British transit staff shut down different parts of the underground several times this year. In India, food-delivery workers went on strike last month over pay cuts.

For more, Puck’s Matt Belloni and Bloomberg’s Lucas Shaw do a good job breaking down the Hollywood mess, and American’s hometown paper, the Dallas Morning News, details the pilots’ grievances.

Read This

Happy publication day to my boss, Ben Smith. His new book details the inside story of two online media rivals, Jonah Peretti of HuffPost and BuzzFeed and Nick Denton of Gawker Media, whose delirious pursuit of attention released the dark forces that would overtake the internet and American society. I read it, it’s great, and it’s out today. Order it here.

And read an excerpt about Buzzfeed’s fateful decision — backed by Ben — to turn down a Disney acquisition in 2013, as well as his account of his decision to publish the Trump-Russia dossier in 2017.

One Good Text

David Sykes is the chief commercial officer at Klarna, a major provider of “buy now, pay later” loans to online shoppers. Read our full exchange here.

  • Lead lining: David Einhorn, the habitually gloomy hedge-fund firebrand, found the positive in the recent bank turmoil. He told investors in his Greenlight Capital that he thinks the Fed will ease off rate hikes this year, rather than risk further destabilizing regional lenders. Greenlight closed out its short positions on stock indexes and the housing market, and bought shares of the banks that acquired the remains of Silicon Valley Bank and Signature.

— Bradley

Billionaire investor Carl Icahn
Reuters/Brendan McDermid

After decades of corporate raiding and activist campaigns, Carl Icahn is now the target. Short-seller Nate Anderson, whose Hindenburg Research shaved billions of dollars of market value off India’s Adani Group earlier this year, says Icahn’s listed company has inflated the value of its holdings by more than 75%.

“We think Icahn, a legend of Wall Street, has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well,” he wrote in his report.

How Are We Doing?

If you’re liking Semafor Business, please share with family, friends, bosses, and juniors. And we want to hear from you — what we got right and wrong, and what we should cover next. You can reply to this email.

See you Thursday.

Want more Semafor? Explore all our newsletters at semafor.com/newsletters

— Liz and Bradley

Sign up now to get Semafor in your inbox.
Semafor, Inc. 228 Park Ave S, PMB 59081, New York, NY, 10003-1502, USA