The Securities and Exchange Commission is suing Coinbase because its platform for dealing crypto assets is being used as an unregistered national securities exchange, broker, and clearing agency, according to the SEC.
The SEC’s complaint claims that since at least 2019, Coinbase “has made billions of dollars unlawfully” through the purchase and sale of securities backed by digital assets. The SEC claims that Coinbase mixes exchange, broker, and clearing agency services without registering them with the Commission.
The SEC’s complaint alleges that Coinbase’s failure to register has deprived investors of SEC inspection, recordkeeping obligations, and conflict of interest protections. The regulator also criticised Coinbase for disregarding the law’s requirement that it register its staking-as-a-service programme.
“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,” says Gurbir S. Grewal, director of the SEC’s Division of Enforcement.
“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. 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.”
Coinbase sued the Securities and Exchange Commission in April, requesting that the court order the regulator to reply to a petition from the previous year over the “rules to govern the regulation” of digital assets. Because of its dissatisfaction with the legal framework, the crypto powerhouse has also toyed with the possibility of shifting its headquarters outside of the US.
The SEC is requesting injunctive relief, disgorgement of ill-gotten earnings along with interest, fines, and other equitable relief in its complaint, which was submitted to the US District Court for the Southern District of New York.
Following the death of FTX, the watchdog has launched a number of crackdowns, with this one being the most recent. In a lawsuit filed against Binance and its CEO Changpeng Zhao yesterday, the SEC accused the largest cryptocurrency exchange in the world of participating in a “extensive web of deception” and a number of securities law violations.
