SEC Takes Legal Action Against Coinbase for Allegedly Trading Unregistered Securities

The U.S. Securities and Exchange Commission (SEC) has filed a complaint accusing cryptocurrency exchange Coinbase of trading unregistered securities. The regulator asserts that the company failed to register with the SEC, and its failure to do so violated the disclosure regime established for securities markets in the United States. The charges laid against Coinbase by the SEC come just one day after a similar complaint was filed against Binance and its CEO, Changpeng “CZ” Zhao.

COIN’s price crashes on the daily chart following SEC lawsuit. Source: COINUSD Tradingview

SEC Targets Coinbase and the Crypto Industry

The SEC alleges in the complaint filed in the U.S. Federal Court that Coinbase operates as a broker, exchange, and clearing agency, which is not typical of platforms in the traditional financial sector. In this regard, the regulator claims that the company violated the disclosure regime established for securities markets in the country. The SEC also accuses Coinbase of violating U.S. securities laws since 2019 by merging functions such as broker, clearinghouse, and exchange into a single platform and failing to register with the SEC as to any of the aforementioned three functions.

Sec Takes Legal Action Against Coinbase For Allegedly Trading Unregistered Securities

The Commission further added that Coinbase has violated U.S. laws with different products, including Prime, Staking, and Wallet. The SEC has brought charges against both Coinbase and CGI, the holding company of the cryptocurrency exchange.

Unfair Enforcement Approach by the SEC?

At the time of writing, Coinbase or its top executives haven’t issued any statement regarding the lawsuit. Nonetheless, the crypto community has expressed discontent with the complaint and identified inaccuracies in the filing. For instance, Coinbase is one of the oldest exchanges in the world, having been founded in 2013. Moreover, Coinbase is a publicly traded company in the United States, and as such, it had to comply with various requirements, documentation, financial statements, and more to launch its Initial Public Offering (IPO).

However, the SEC filed the lawsuit over two years after Coinbase went public. Additionally, a pseudonymous individual on Twitter called out the SEC, suggesting that the regulator’s criteria for identifying securities were arbitrary.

As always, the SEC has its job to do; only time will tell how the case progresses.

Featured image from Unsplash, chart from Tradingview

Bitrabo Editorial
Bitrabo Editorial
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