A day after Binance was charged with 13 securities law violations, the US Securities and Exchange Commission (SEC) has set its sights on Coinbase.
On June 6, the SEC announced it was suing Coinbase for allegedly operating as an unregistered stockbroker, unregistered exchange, and unregistered clearing house. Furthermore, the SEC alleges that Coinbase’s staking program violates the Securities Act.
Today we have Coinbase, Inc. indicted for operating its crypto-asset trading platform as an unregistered national stock exchange, broker and clearing house and for failing to register the offering and sale of its crypto-asset staking-as-a-service program.https : http://t.co/XPG2gDkxtV pic.twitter.com/hCdVMw8B2v
— U.S. Securities and Exchange Commission (@SECGov) June 6, 2023
The lawsuit
The SEC’s complaint, which dates back to at least 2019, alleges that Coinbase generated billions of dollars by unlawfully facilitating the trading of crypto assets. According to the SEC, Coinbase operates as an exchange, brokerage 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 clients, and providing facilities for data matching and settlement of crypto asset securities transactions.
The SEC argues that Coinbase’s failure to register has deprived investors of crucial safeguards, such as regulatory oversight, proper administration 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 agent with respect to certain violations.
SEC Chairman Gary Gensler emphasized the importance of Coinbase’s alleged non-compliance, 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 complying with legal standards in protecting the investing public.
“While Coinbase’s calculated decisions have made it possible to make billions, it has come at the expense of investors.”
Gurbir S. Grewal, Director, SEC Enforcement Division
Gurbir S. Grewal, director of the SEC’s enforcement division, echoed Gensler’s sentiments, noting that Coinbase was fully aware of the applicability of federal securities laws to its operations, but deliberately chose not to comply. Grewal stressed that Coinbase’s actions may have harmed investors and emphasized the need to hold the company accountable.
“While Coinbase’s calculated decisions have allowed it to make billions, it has come at the expense of investors by depriving them of the protections they are entitled to. Today’s action is to hold Coinbase accountable for its choices,” he explained.
The SEC’s suit, filed in U.S. District Court for the Southern District of New York, seeks injunctive relief, remission of ill-gotten gains with interest, fines and other equitable remedies.
This was a breaking news story and has been updated.
