In Coinbase news another blow to the cryptocurrency market came on Tuesday when the U.S. Securities and Exchange Commission filed a lawsuit against Coinbase (COIN.O), the largest cryptocurrency exchange in the country, alleging that it was operating in violation of the law by not registering as an exchange.
Following its case against Binance, the largest cryptocurrency exchange in the world, and its founder Changpeng Zhao, the SEC has filed a second complaint in as many days against a significant cryptocurrency exchange.
Both legal actions are a part of SEC Chair Gary Gensler’s campaign to claim authority over the cryptocurrency market, which he once more referred to on Tuesday as a “Wild West” that has eroded investor confidence in the American capital markets.
According to Gensler speaking to CNBC, “the entire business model is built on a noncompliance with the U.S. securities laws and we’re asking them to come into compliance.”
Crypto firms claim that the SEC’s regulations are confusing and that the organization is overreaching in its attempts to control them. Coinbase’s general counsel, Paul Grewal, stated in a statement that the business will carry on as normal and has “demonstrated commitment to compliance.”
On Tuesday, ten US states—including California—accused Coinbase of breaking securities laws with regard to its staking rewards program.
Shares of Coinbase Global Inc., the company that owns Coinbase, were down $6.42, or 12.8%, to $52.29 after plummeting as far as 20.9% earlier.
Within a few hours after the SEC filing, Coinbase users withdrew more than $57 million, according to the data company Nansen.
According to the SEC’s lawsuit, which was filed in federal court in Manhattan, Coinbase has generated billions of dollars since at least 2019 by acting as a middleman in cryptocurrency transactions while dodging transparency rules intended to safeguard investors.
According to the SEC, Coinbase traded at least 13 digital assets, including tokens like Solana, Cardano, and Polygon, that are securities and should have been registered.
In this artwork from March 4, 2022, the cryptocurrency is seen in front of the Coinbase logo. Dado Ruvic’s illustration is from Reuters.
Since its founding in 2012, Coinbase has serviced more than 108 million users, and as of the end of March, it has $130 billion in client cash and cryptocurrency assets on its financial sheet. 75% of its $3.15 billion in net revenue last year came from transactions.
Around 3.5 million people participate in Coinbase’s staking rewards program, which pools cryptocurrency assets and utilizes them to promote activity on the blockchain network in return for “rewards” that users get after Coinbase deducts a fee from each transaction.
Alabama, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin are among the other states targeted by this initiative. Coinbase was penalized $5 million by New Jersey for selling unregistered securities.
Rules “CAN’T IGNORE”
Tuesday’s SEC action calls for injunctive remedies, civil penalties, and the recovery of earnings that were obtained illegally. In March, the SEC forewarned Coinbase that charges would be forthcoming.
“You simply can’t ignore the rules because you don’t like them,” SEC Enforcement Chief Gurbir Grewal said in a statement.
The sector has increased compliance, shelved projects, and expanded outside of the nation as a result of Gensler’s crypto crackdown.
Gensler’s attempts to regulate the sector were rebuffed by Blockchain Association CEO Kristin Smith.
We’re convinced that the legal system will eventually disprove Chair Gensler, she added.
The SEC charged Binance on Monday with exaggerating trading volumes, diverting client funds, mixing assets inappropriately, failing to block affluent US users from using its platform, and deceiving users about its controls.
Following the revelation on Monday, investors withdrew over $790 million from Binance and its U.S. affiliate, data company Nansen said on Tuesday morning.
The action, according to Binance, reflects the SEC’s “misguided and conscious refusal” to bring clarity to the cryptocurrency sector. Binance has vowed to forcefully defend itself against it. Coinbase News.