6-6-2023 (NEW YORK) The US Securities and Exchange Commission (SEC) has taken legal action against Coinbase, the largest cryptocurrency exchange in the United States, for allegedly operating unlawfully without registering with the regulatory authority. This lawsuit follows a similar case filed by the SEC against Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao.
Both lawsuits are part of SEC Chair Gary Gensler’s efforts to establish jurisdiction over the cryptocurrency industry and enhance investor protection in the realm of virtual currencies. Gensler expressed his concerns regarding Coinbase’s alleged failures, stating that they deprive investors of essential safeguards, such as anti-fraud measures, proper disclosure, conflict of interest safeguards, and regular inspections.
Coinbase has yet to respond to the SEC’s allegations. In premarket trading, shares of Coinbase Global Inc, the parent company of Coinbase, dropped by 17.1 percent.
According to the complaint filed in Manhattan federal court, the SEC accuses Coinbase of evading disclosure requirements while handling cryptocurrency transactions and generating billions of dollars in revenue since at least 2019. The lawsuit encompasses various aspects of Coinbase’s operations, including Coinbase Prime, a platform for routing orders, Coinbase Wallet, a service enabling investors to access liquidity, and the Coinbase Earn staking program.
The staking program involves Coinbase pooling crypto assets and utilizing them for blockchain network activities, offering rewards to customers while retaining a commission for itself. The SEC asserts that Coinbase was fully aware of its obligation to comply with federal securities laws but chose to ignore them.
SEC Enforcement Chief Gurbir Grewal emphasized the importance of adhering to regulatory rules, stating, “You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones.”
In the case against Binance, the SEC alleges various misconducts, including inflating trading volumes, misusing customer funds, commingling assets improperly, failing to restrict wealthy US customers from using the platform, and providing misleading information to customers regarding its controls.
