One day after charging Binance with 13 counts of securities laws violations, the U.S. Securities and Exchange Commission (SEC) has set its sights on Coinbase.
On June 6, the SEC announced that it was suing Coinbase for allegedly operating as an unregistered broker of securities, an unregistered exchange, and an unregistered clearing agency. Further, the SEC claims that Coinbase’s staking program violates the Securities Act.
Today we charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and for failing to register the offer and sale of its crypto asset staking-as-a-service program.https://t.co/XPG2gDkxtV pic.twitter.com/hCdVMw8B2v
— U.S. Securities and Exchange Commission (@SECGov) June 6, 2023
The SEC’s complaint, which dates back to at least 2019, claims that Coinbase has generated billions of dollars by unlawfully facilitating the trading of crypto asset securities. According to the SEC, Coinbase has been operating as an exchange, broker, and clearing agency without obtaining the necessary registrations from the Commission.
These unregistered services provided by Coinbase include acting as a marketplace, bringing together buyers and sellers of securities, executing securities transactions on behalf of customers, and offering facilities for data comparison and settlement of crypto asset securities transactions.
The SEC argues that Coinbase’s failure to register has deprived investors of critical safeguards, such as regulatory oversight, proper recordkeeping, and protection against conflicts of interest. The SEC’s complaint also extends liability to Coinbase’s holding company, Coinbase Global Inc. (CGI), as a control person in relation to certain violations.
SEC Chair Gary Gensler emphasized the significance of Coinbase’s alleged noncompliance, stating, “Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.” Gensler emphasized the importance of adherence to regulatory standards in protecting the investing public.
“While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors.”
Gurbir S. Grewal, Director, SEC Division of Enforcement
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, echoed Gensler’s sentiments, noting that Coinbase was fully aware of the applicability of federal securities laws to its activities but deliberately chose not to comply. Grewal emphasized that Coinbase’s actions had potentially harmed investors and emphasized the need to hold the company accountable.
“While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled. Today’s action seeks to hold Coinbase accountable for its choices,” he explained.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, seeks injunctive relief, disgorgement of ill-gotten gains with interest, penalties, and other equitable remedies.
This was a breaking news story and has been updated.
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