SEC Files Lawsuit Against Coinbase Alleging Securities Violations
Coinbase, the largest cryptocurrency exchange in the U.S., is facing charges from the Securities and Exchange Commission (SEC) for operating as an unregistered national securities exchange, broker, and clearing agency.
The SEC further accuses Coinbase of failing to register its crypto asset staking-as-a-service program.
The complaint alleges that Coinbase has conducted the trading of substantial amounts of crypto asset securities without proper registration since 2019.
According to the SEC, Coinbase's failure to register has deprived investors of vital protections, including SEC inspection, recordkeeping obligations, and safeguards against conflicts of interest.
The charges also encompass Coinbase's holding company, Coinbase Global Inc., as it is deemed a control entity and therefore accountable for some of Coinbase's breaches.
Furthermore, the SEC claims that Coinbase engaged in an unregistered securities offering via its staking-as-a-service program. This program enables customers to earn profits by providing blockchain transaction validation services.
Allegedly, Coinbase combined customers' stakeable crypto assets, conducted the required validations, and rewarded customers with a share of the generated rewards. The SEC asserts that Coinbase did not register these offers and sales as mandated by law.
Yesterday, the SEC filed a lawsuit against Binance and its CEO Changpeng Zhao, accusing the exchange of breaching securities laws, evading SEC regulation, and inadequately informing their customers.
The consecutive lawsuits within a span of two days demonstrate a significant endeavor by U.S. regulators to establish a new regulatory approach and enforce securities laws on digital assets.
SEC Chair Gary Gensler expressed his disapproval of Coinbase's alleged denial of crucial safeguards for investors.
Gurbir S. Grewal, Director of the SEC's Division of Enforcement, accused Coinbase of willfully disregarding federal securities laws, highlighting the significant repercussions for the investing public.
Similar to the SEC's lawsuit against Binance, the regulator is pursuing injunctive relief, disgorgement of unlawfully obtained profits, penalties, and other appropriate remedies.
The investigation was carried out by the SEC's Crypto Assets and Cyber Unit, in collaboration with the San Francisco Regional Office and a multi-state task force comprising ten state securities regulators.