Yesterday, the U.S Securities and Exchange Commission (SEC) filed 13 charges against Binance — the largest cryptocurrency exchange in the world — its affiliaties and founder and CEO Changpeng Zhao. These charges included operating as an unregistered exchange and the unregistered offer and sale of securities. Moving swiftly, the SEC also filed charges against Coinbase (NASDAQ:COIN) this morning for operating as an unregistered securities exchange, broker and clearing agency, as well as failing to register the offer and sale of its staking-as-a-service program. COIN stock is plunging lower by more than 13% on the news.
Per the SEC:
“According to the SEC’s complaint, since at least 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities. The SEC alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law.”
COIN Stock: What to Know as the SEC Sues Coinbase
Since Coinbase failed to register as a securities exchange, the SEC believes the platform put customers at risk. These risks include a lack of record-keeping requirements, inspection by the SEC and protections against conflicts of interest. Meanwhile, the regulatory agency also added that Coinbase’s holding company, Coinbase Global Inc, is liable for some of Coinbase’s charges.
Specifically, Coinbase allegedly provided a marketplace that coordinated the orders of securities for buyers and sellers using “established, non-discretionary methods under which such orders interact” while acting as an unregistered securities exchange. Through its staking-as-a-service program, Coinbase also allegedly failed to register its offer and sales as required by the law.
“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,” said SEC Division of Enforcement Director Gurbir S. Grewal, “Today’s action seeks to hold Coinbase accountable for its choices.”
Through its complaint, the SEC seeks “injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.” Specific dollar amounts of the relief or penalties were not immediately provided.
Shareholders of COIN stock shouldn’t be overly surprised by this news. Back in March, the company received a Wells Notice, which is basically a warning that the SEC would likely take enforcement action.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
