Coinbase’s Chief Legal Officer, Paul Grewal, has shed light on the recent SEC case where trading certain crypto assets on secondary markets like Coinbase was declared a securities transaction, aligning with Chair Gary Gensler’s stance. Grewal was critical of the default judgments, where there was no opposition to the claims made by the regulator due to the absence of the defendant. An absence in the contested hearing meant that the judge made the decision relying solely on the SEC’s side of the story, even if it might be outlandish or incorrect.
Default judgments aren’t contested. The whole point is that the defendant didn’t show up from his hideout in India or wherever to contest anything. So the judge has the SEC on one side and no one on the other. Not only is there no one pushing back on anything the SEC says, but the judge is required under the applicable rule to take everything the SEC says in the complaint as true. No matter how far-fetched or plain wrong it is.
The veteran legal expert also stated that these rulings, where the defendants don’t contest, carry little weight to be used as precedent or for persuasive purposes in other cases. Moreover, the judge confirmed in her order that she only considered the SEC’s filings and did not consider any amicus briefs or other papers showing the fallacy of the SEC’s arguments, Grewal asserted.
“All of this is to say that in seeking default, the SEC was pushing against a completely open door. It’s an example of why courts generally do not give collateral estoppel effect to default judgments in other cases, he argued.
Coinbase: SEC’s Controversial Strategy Denies Fair Representation
The Coinbase lawyer came down hard on the regulator’s tactic of going after absent defendants and intermediaries while avoiding issuers, calling it troubling. As per him, those with the “greatest incentive and access to information” lose the chance to counter the SEC’s arguments, denying them fair and equitable justice.
Not long ago, the Securities and Exchange Commission won a partial victory in its lawsuit against Terraform Labs, which develops blockchain-based platforms and tokens. Judge Jed Rakoff in the U.S. District Court ruled that Terraform Labs and its co-founder, Do Hyeong Kwon, violated securities laws by offering and selling unregistered digital tokens.