Cryptocurrency exchange Coinbase Global Inc is facing a patent lawsuit related to its digital trading technology, brought by a crypto company whose digital token offering led to a settlement with U.S. securities regulators in 2019.
The lawsuit, filed Thursday by Veritaseum Capital LLC in Delaware federal court, claims Coinbase infringed a patent awarded to Veritaseum founder Reggie Middleton by the U.S. Patent and Trademark Office last December.
Veritaseum Capital accused several Coinbase services, including its blockchain infrastructure for validating transactions, of infringing the patent. It asked the court for at least $350 million in damages.
Coinbase, one of the world’s largest platforms for trading cryptocurrency, did not immediately respond to a request for comment on Friday.
Veritaseum formerly issued the token VERI. In 2019 Middleton and two of his Veritaseum entities paid the U.S. Securities and Exchange Commission more than $9.4 million, including a $1 million penalty against Middleton himself, to settle charges of a “fraudulent scheme” to sell the token in 2017 and 2018.
The SEC had accused them of misleading investors about demand for the tokens and manipulating their price, among other things. They agreed to the settlement without denying or admitting to the underlying charges.
Middleton and Veritaseum argued to a Brooklyn federal court earlier in 2019 that they did not make any fraudulent statements, that the tokens were not securities, and that trading at issue was “actually an effort by Mr. Middleton to test out a new online cryptocurrency exchange.”
Veritaseum’s website says it “builds blockchain-based, peer-to-peer capital markets as software on a global scale.” Thursday’s lawsuit accuses Coinbase features including its website, mobile app and Coinbase Cloud, Pay, and Wallet services of infringing a patent covering a secure method for processing digital-currency transactions.
Veritaseum Capital’s attorney Carl Brundidge of Brundidge Stanger said Friday that Coinbase was “uncooperative” when they tried to settle out of court.
Middleton and Veritaseum separately sued T-Mobile in 2020, alleging the telecom company’s security lapses led to hackers stealing $8.7 million in cryptocurrency from them. T-Mobile contested the claims, and the case was sent to arbitration in August.
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