​SEC sues Coinbase for trading in unregistered securities

What’s new? On June 6, the US Securities and Exchange Commission (SEC) filed a lawsuit against US crypto exchange Coinbase for offering unregistered securities. In its filing, the regulator claims that the platform was never registered as a broker, national securities exchange, or clearing agency. The SEC also qualified as securities for several tokens offered by the exchange, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO. Similar charges were brought against the Binance exchange a day earlier by the SEC.

The SEC’s press release

What is known about the situation? According to the lawsuit, Coinbase has been operating as an unregistered securities broker since 2019, nearly two years before it went public on the Nasdaq stock exchange through an initial public offering (IPO) in April 2021. The SEC also claims that Coinbase’s staking program includes five crypto assets, making it an investment contract and therefore a security. Amid the filing of the lawsuit, Coinbase’s (COIN) stock price has dropped by 9,05% to $58,71 in the past 24 hours, according to Tradingview.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said that Coinbase deliberately refused to comply with securities laws, knowing full well that they applied to the products the exchange offered. This, he said, allowed the platform to maximize profits while putting investors at risk.

“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great,” the official added.

The regulator requires the platform to reimburse illegally obtained profits and pay fines.

Confrontation between the SEC and Coinbase. In March, the SEC notified Coinbase of possible violations of securities laws, after which the exchange filed a lawsuit against the Commission, demanding that it promulgate regulations for the crypto industry. The exchange submitted a petition to the Commission last summer, but it never received a response. In May, the US court ordered the SEC to respond within 10 days to Coinbase.

In its final response in May, the SEC cited the difficulty of forming a regulatory framework for the industry in a short timeframe. Representatives of Coinbase interpreted the statement as the Commission’s intention to pursue its current approach to regulation through fines and enforcement actions in the near term.

Coinbase CEO accuses the SEC of a “crusade” against the crypto industry

In this, Brian Armstrong said that the company will not leave the United States

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Due to the lack of regulatory clarity, Coinbase CEO Brian Armstrong even allowed the possibility of the company to leave for another jurisdiction, but later assured investors and the public of its full commitment to the US market. At the same time, the company also opened an international branch.

On June 5 the Commission filed 13 charges against Binance, the US arm of Binance.US as well as personally against the companies’ founder Changpeng Zhao, including violating securities laws and using customer funds for their own purposes. Binance has denied all the charges.