The US Securities and Exchange Commission has charged crypto exchange Coinbase with violating securities laws, expanding a crackdown on the sector following an enforcement action against Binance.
In a civil complaint on Tuesday, the SEC accused Coinbase of operating its crypto trading platform as an unregistered national securities exchange, broker, and clearing agency.
The suit alleges that since 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities, and exposing investors to ‘significant risk’.
Coinbase shares plunged by more than 20 percent in pre-market action after the news broke, before paring losses by midday, when they were down 11 percent.
In a statement on Twitter, Coinbase CEO Brian Armstrong said the SEC complaint ‘is exclusively focused on what is or is not a security’ adding that the company is ‘confident in our facts and the law.’
Coinbase CEO is seen above. The SEC charged Coinbase with violating securities laws, expanding a crackdown on the crypto sector
Shares of Coinbase dropped more than 19 percent at the opening bell, after losing 10 percent in the prior session following an SEC complaint charging Binance
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: ‘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.’
‘As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them,’ he added.
The SEC also charged Coinbase for failing to register the offer and sale of its crypto asset staking-as-a-service program, in which the company pays customers to use their crypto tokens to facilitate blockchain transactions.
Users of trading platforms can stake their cryptocurrency, essentially locking up some of their assets, in exchange for payment later, much like earning interest rates in a savings account.
Those assets are used by platforms like Coinbase Global to guarantee other transactions taking place on the blockchain. Coinbase has been critical of regulations related to staking, calling them vague.
The SEC claims Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the commission, as required by law.
‘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,’ said SEC Chair Gary Gensler in a statement.
In a statement, Coinbase Paul Grewal told DailyMail.com: ‘The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance.’
‘The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual,’ he added.
In a civil complaint on Tuesday, the SEC accused publicly traded Coinbase of operating its crypto trading platform as an unregistered national securities exchange
Bitcoin price dropped sharply after the Binance suit on Monday, and was down 4% Tuesday
A separate SEC complaint on Monday charged Binance, its CEO Changpeng Zhao and the operator of Binance.US over what it called a ‘web of deception’ to evade US laws
Shares of Coinbase had already dropped about 10 percent in yesterday’s session after an SEC complaint against fellow exchange Binance.
That complaint on Monday charged Binance, its CEO Changpeng Zhao and the operator of Binance. US over what it called a ‘web of deception’ to evade US laws.
Binance saw net outflows of $778.6 million of crypto tokens on the ethereum blockchain, with its U.S. affiliate, Binance.US, registering net outflows of $13 million, according to data firm Nansen.
The SEC alleged in 13 charges that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.
In statements on Monday, Binance said it had been cooperating with the SEC’s probes and had ‘worked hard to answer their questions and address their concerns’, including by trying to reach a negotiated settlement.
‘We intend to defend our platform vigorously,’ Binance said in a blog.