‘Anything But Stable’: Class Action Alleges Coinbase, GMO Trust Withheld GYEN Volatility Info from Investors

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Coinbase and the issuer of the yen-backed GYEN cryptocurrency face a proposed class action over their alleged failure to disclose the so-called stablecoin’s apparent susceptibility to “wild fluctuations in value” since it was first issued last year. 

The 40-page lawsuit in California relays that despite its “stablecoin” moniker, which indicates that an asset is collateralized with an actual underlying hard asset, such as a government-issued currency, GYEN, which is backed by the Japanese yen, has “been anything but stable.” Although the yen has fluctuated only seven percent against the U.S. dollar since January 2021, GYEN has swung over 200 percent against the U.S. dollar, the complaint states. 

According to the lawsuit, Tokyo-based defendant GMO-Z.com Trust Company has failed to disclose to buyers GYEN’s volatility and overall nature, and the company’s partnership with cryptocurrency exchange Coinbase has allowed it to issue more GYEN tokens to more investors and generate commissions for each entity to share. The case claims that in truth, the value of GYEN depended on the liquidity of the asset itself and had “little to no connection at all to the value of the yen.” 

“To promote GYEN, Coinbase mimicked GMO Trust’s claims that GYEN was pegged one-to-one in value to the yen,” the case says. “Both entities knew, based on a prior destabilizing event, that GYEN’s peg to the yen was prone to break and that such an event would be likely, if not certain, when GYEN opened for trading on Coinbase. Both entities withheld this information from investors.” 

The case says that when Coinbase first allowed GYEN trading on its exchange in November 2021, the asset “immediately came untethered from the yen and rose sharply in value.” Although investors placed orders under the belief that the coin’s value was, as advertised, equal to that of the yen, its worth was actually “up to seven times more” than the yen, the suit states. 

Just as suddenly, however, the value of GYEN fell “back to the peg,” dropping 80 percent in one day, the lawsuit says. At the same time, Coinbase, according to the complaint, “compounded the harm” to investors by restricting their ability to sell the asset before abruptly suspending all GYEN trading without explanation.

The lawsuit alleges Coinbase and GMO Trust’s “deceit” caused hundreds of GYEN buyers to collectively lose “untold millions in a matter of hours.” 

“Both GMO Trust and Coinbase ignored or shrugged off demands for an explanation and recompense, each insinuating that the other was responsible for the collapse,” the filing alleges. “In truth, both contributed to the debacle as both deceived investors regarding the nature of the asset.” 

The lawsuit looks to represent all persons who bought or acquired GYEN in the United States or its territories at a time when the GYEN was unpegged from the Japanese yen and lost money as a result. 

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