06-07-2023, 08:27 PM
After Binance, SEC Sues Coinbase over Illegal Operation of Crypto Exchange
<p class="MsoNormal">The
Securities and Exchange Commission (SEC) has charged Coinbase, the largest
cryptocurrency exchange in the United States, with operating an illegal trading
platform that offered unregistered crypto asset securities. Additionally, the securities
watchdog accused the platform of running a digital asset
staking-as-a-service programme without authorization.</p><blockquote class="twitter-tweet"><p lang="en" dir="ltr">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.<a href="https://t.co/XPG2gDkxtV">https://t.co/XPG2gDkxtV</a><a href="https://t.co/hCdVMw8B2v">pic.twitter.com/hCdVMw8B2v</a></p>— U.S. Securities and Exchange Commission (@SECGov) <a href="https://twitter.com/SECGov/status/1666059252442746881?ref_src=twsrc%5Etfw">June 6, 2023</a></blockquote><p class="MsoNormal text-align-justify">SEC
Cracks Down on Coinbase</p><p class="MsoNormal text-align-justify">In a
complaint <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.1.0.pdf" target="_blank" rel="follow">filed</a> before a US district court in New York, the SEC
further alleged that Coinbase combines the functions of an exchange, brokerage and
clearing agency, which are separate under US laws, without registering to
engage in these activities.</p><p class="MsoNormal">“All the
while, Coinbase has earned billions of dollars in revenues by, among other
things, collecting transaction fees from investors whom Coinbase has deprived
of the disclosures and protections that registration entails and thus exposed
to significant risk,” the SEC explained in its complaint. </p><p class="MsoNormal text-align-justify">The lawsuit
against Coinbase comes a day after the regulator <a href="https://www.financemagnates.com/cryptocurrency/sec-charges-binance-ceo-over-illegal-exchanges-commingling-of-client-fund/" target="_blank" rel="follow">charged Binance</a>, the world’s largest cryptocurrency exchange
by trading volume, before a district court in Columbia for allegedly operating an illegal exchange, offering unregistered crypto
asset securities to investors and <a href="https://www.financemagnates.com/cryptocurrency/binance-jumbled-customer-funds-with-company-revenue-report/" target="_blank" rel="follow">commingling customers’ funds</a>. Also, Coinbase <a href="https://www.financemagnates.com/cryptocurrency/regulation/coinbase-expects-enforcement-action-amid-secs-wells-notice/" target="_blank" rel="follow">received a Wells Notice</a> from the regulator in late March, notifying the
Nasdaq-listed crypto exchange that it has been violating the US securities law
by offering unregistered crypto asset securities.</p><p class="MsoNormal text-align-justify">More Allegations</p><p class="MsoNormal text-align-justify">In its
complaint, the SEC alleged that Coinbase since at least 2019 has been offering
unregistered securities through its staking-as-a-service programme. Crypto
staking involves participation in the validation of transactions on a
blockchain that uses a proof-of-stake consensus mechanism in order to earn
rewards.</p><p class="MsoNormal text-align-justify">Furthermore,
the securities watchdog claimed since at least 2016 Coinbase had understood that a
Supreme Court had determined that crypto assets are an
investment contract subject to US securities laws. It added that the exchange has been offering crypto asset securities despite claiming for years that
it was striving for compliance with the decision.</p><p class="MsoNormal">"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,” Gurbir Grewal, the Director of the SEC’s Division of Enforcement,
said in <a href="https://www.sec.gov/news/press-release/2023-102" target="_blank" rel="follow">a statement</a>. “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.”</p><p class="MsoNormal">In the statement, the SEC said it is seeking injunctive relief, disgorgement of
ill-gotten gains plus interest, penalties, and other equitable relief, from the
case.</p><p class="MsoNormal text-align-justify">Coinbase
Operates ‘Business as Usual’</p><p class="MsoNormal">Meanwhile, Paul Grewal, Coinbase’s Chief Legal Officer (CLO) and General Counsel,
in a statement said the crypto exchange has demonstrated commitment to compliance. He
accused the SEC of relying on 'an enforcement-only approach' without clear
rules for the crypto industry.</p><p class="MsoNormal text-align-justify">In April, <a href="https://www.financemagnates.com/cryptocurrency/coinbase-sues-sec-over-silence-on-2022-rulemaking-petition/" target="_blank" rel="follow">Coinbase sued the SEC</a> for failing to respond to its <a href="https://www.sec.gov/rules/petitions/2022/petn4-789.pdf" target="_blank" rel="follow">July 2022 petition</a> that asked the US securities watchdog to
provide guidance for the cryptocurrency industry using its formal rulemaking
process. The petition was filed in the same month when reports first emerged <a href="https://www.financemagnates.com/cryptocurrency/news/us-sec-reportedly-probing-coinbase-for-listing-unregistered-securities/" target="_blank" rel="follow">that the SEC was probing Coinbase</a> over alleged unregistered crypto asset
securities.</p><p class="MsoNormal">“The
solution is legislation that allows fair rules for the road to be developed
transparently and applied equally, not litigation,” Grewal said, speaking on SEC’s new lawsuit. “In the meantime, we’ll continue to operate our business as
usual.”</p><p>Over the last few months, the SEC has continued to crack down on cryptocurrency exchanges in the United States, arguing that their crypto offerings are unregistered securities. As a result, crypto firms, such as <a href="https://www.financemagnates.com/cryptocurrency/kraken-shuts-staking-as-a-service-in-us-amid-30m-sec-settlement/" target="_blank" rel="follow">Kraken</a>, <a href="https://www.financemagnates.com/cryptocurrency/sec-sues-crypto-exchange-bittrex-ceo-for-operating-without-registration/" target="_blank" rel="follow">Bittrex</a>, <a href="https://www.financemagnates.com/cryptocurrency/sec-takes-gemini-genesis-to-court-for-selling-unregistered-securities/" target="_blank" rel="follow">Gemini
and Genesis</a>, have been at loggerheads with the regulator.</p><p class="MsoNormal" style="">Citi chooses NetDania; FMA warns against imposter; <a href="https://www.financemagnates.com/forex/news-nuggets-6-june-citi-chooses-netdania-fma-warns-against-imposter/" target="_blank" rel="follow" style="">read today's news nuggets</a>.</p>
This article was written by Solomon Oladipupo at www.financemagnates.com.
https://www.financemagnates.com//cryptoc...-exchange/
<p class="MsoNormal">The
Securities and Exchange Commission (SEC) has charged Coinbase, the largest
cryptocurrency exchange in the United States, with operating an illegal trading
platform that offered unregistered crypto asset securities. Additionally, the securities
watchdog accused the platform of running a digital asset
staking-as-a-service programme without authorization.</p><blockquote class="twitter-tweet"><p lang="en" dir="ltr">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.<a href="https://t.co/XPG2gDkxtV">https://t.co/XPG2gDkxtV</a><a href="https://t.co/hCdVMw8B2v">pic.twitter.com/hCdVMw8B2v</a></p>— U.S. Securities and Exchange Commission (@SECGov) <a href="https://twitter.com/SECGov/status/1666059252442746881?ref_src=twsrc%5Etfw">June 6, 2023</a></blockquote><p class="MsoNormal text-align-justify">SEC
Cracks Down on Coinbase</p><p class="MsoNormal text-align-justify">In a
complaint <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.1.0.pdf" target="_blank" rel="follow">filed</a> before a US district court in New York, the SEC
further alleged that Coinbase combines the functions of an exchange, brokerage and
clearing agency, which are separate under US laws, without registering to
engage in these activities.</p><p class="MsoNormal">“All the
while, Coinbase has earned billions of dollars in revenues by, among other
things, collecting transaction fees from investors whom Coinbase has deprived
of the disclosures and protections that registration entails and thus exposed
to significant risk,” the SEC explained in its complaint. </p><p class="MsoNormal text-align-justify">The lawsuit
against Coinbase comes a day after the regulator <a href="https://www.financemagnates.com/cryptocurrency/sec-charges-binance-ceo-over-illegal-exchanges-commingling-of-client-fund/" target="_blank" rel="follow">charged Binance</a>, the world’s largest cryptocurrency exchange
by trading volume, before a district court in Columbia for allegedly operating an illegal exchange, offering unregistered crypto
asset securities to investors and <a href="https://www.financemagnates.com/cryptocurrency/binance-jumbled-customer-funds-with-company-revenue-report/" target="_blank" rel="follow">commingling customers’ funds</a>. Also, Coinbase <a href="https://www.financemagnates.com/cryptocurrency/regulation/coinbase-expects-enforcement-action-amid-secs-wells-notice/" target="_blank" rel="follow">received a Wells Notice</a> from the regulator in late March, notifying the
Nasdaq-listed crypto exchange that it has been violating the US securities law
by offering unregistered crypto asset securities.</p><p class="MsoNormal text-align-justify">More Allegations</p><p class="MsoNormal text-align-justify">In its
complaint, the SEC alleged that Coinbase since at least 2019 has been offering
unregistered securities through its staking-as-a-service programme. Crypto
staking involves participation in the validation of transactions on a
blockchain that uses a proof-of-stake consensus mechanism in order to earn
rewards.</p><p class="MsoNormal text-align-justify">Furthermore,
the securities watchdog claimed since at least 2016 Coinbase had understood that a
Supreme Court had determined that crypto assets are an
investment contract subject to US securities laws. It added that the exchange has been offering crypto asset securities despite claiming for years that
it was striving for compliance with the decision.</p><p class="MsoNormal">"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,” Gurbir Grewal, the Director of the SEC’s Division of Enforcement,
said in <a href="https://www.sec.gov/news/press-release/2023-102" target="_blank" rel="follow">a statement</a>. “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.”</p><p class="MsoNormal">In the statement, the SEC said it is seeking injunctive relief, disgorgement of
ill-gotten gains plus interest, penalties, and other equitable relief, from the
case.</p><p class="MsoNormal text-align-justify">Coinbase
Operates ‘Business as Usual’</p><p class="MsoNormal">Meanwhile, Paul Grewal, Coinbase’s Chief Legal Officer (CLO) and General Counsel,
in a statement said the crypto exchange has demonstrated commitment to compliance. He
accused the SEC of relying on 'an enforcement-only approach' without clear
rules for the crypto industry.</p><p class="MsoNormal text-align-justify">In April, <a href="https://www.financemagnates.com/cryptocurrency/coinbase-sues-sec-over-silence-on-2022-rulemaking-petition/" target="_blank" rel="follow">Coinbase sued the SEC</a> for failing to respond to its <a href="https://www.sec.gov/rules/petitions/2022/petn4-789.pdf" target="_blank" rel="follow">July 2022 petition</a> that asked the US securities watchdog to
provide guidance for the cryptocurrency industry using its formal rulemaking
process. The petition was filed in the same month when reports first emerged <a href="https://www.financemagnates.com/cryptocurrency/news/us-sec-reportedly-probing-coinbase-for-listing-unregistered-securities/" target="_blank" rel="follow">that the SEC was probing Coinbase</a> over alleged unregistered crypto asset
securities.</p><p class="MsoNormal">“The
solution is legislation that allows fair rules for the road to be developed
transparently and applied equally, not litigation,” Grewal said, speaking on SEC’s new lawsuit. “In the meantime, we’ll continue to operate our business as
usual.”</p><p>Over the last few months, the SEC has continued to crack down on cryptocurrency exchanges in the United States, arguing that their crypto offerings are unregistered securities. As a result, crypto firms, such as <a href="https://www.financemagnates.com/cryptocurrency/kraken-shuts-staking-as-a-service-in-us-amid-30m-sec-settlement/" target="_blank" rel="follow">Kraken</a>, <a href="https://www.financemagnates.com/cryptocurrency/sec-sues-crypto-exchange-bittrex-ceo-for-operating-without-registration/" target="_blank" rel="follow">Bittrex</a>, <a href="https://www.financemagnates.com/cryptocurrency/sec-takes-gemini-genesis-to-court-for-selling-unregistered-securities/" target="_blank" rel="follow">Gemini
and Genesis</a>, have been at loggerheads with the regulator.</p><p class="MsoNormal" style="">Citi chooses NetDania; FMA warns against imposter; <a href="https://www.financemagnates.com/forex/news-nuggets-6-june-citi-chooses-netdania-fma-warns-against-imposter/" target="_blank" rel="follow" style="">read today's news nuggets</a>.</p>
This article was written by Solomon Oladipupo at www.financemagnates.com.
https://www.financemagnates.com//cryptoc...-exchange/