In a rather unexpected turn, just one day after Binance found itself in the crosshairs of regulatory scrutiny, the Securities and Exchange Commission (SEC) took legal action against Coinbase, a renowned cryptocurrency exchange.
The lawsuit, filed in a New York federal court, accuses Coinbase of acting as an unregistered broker and exchange, demanding that the company be permanently restrained from continuing these activities.
Coinbase’s Alleged Unlawful Facilitation of Crypto Asset Securities
In a press release published by the SEC, it was revealed that Coinbase had faced charges for conducting its crypto asset trading platform without proper registration as a national securities exchange, broker, and clearing agency.
Furthermore, the complaint asserts that the company neglected to register the offering and sale of its crypto asset staking-as-a-service program. The SEC claims that since 2019, the company has unlawfully facilitated the buying and selling of crypto asset securities, earning billions of dollars in the process.
The complaint further states that it combines the functions of an exchange, broker, and clearing agency without obtaining the required registration from the Commission.
The company is accused of depriving investors of crucial protections, such as SEC inspection, recordkeeping requirements, and safeguards against conflicts of interest.
It allegedly occurred through their provision of a marketplace where buyers and sellers can interact, facilitating securities transactions for customers and offering settlement facilities for crypto asset securities.
Additionally, the SEC accuses Coinbase’s holding company, Coinbase Global Inc. (CGI), of being a control person of Coinbase and thus liable for certain violations. The lawsuit also addresses the company’s staking-as-a-service program, which allegedly conducted an unregistered securities offering.
The program allows customers to earn profits by participating in blockchain transaction validation services. The company pools customers’ stakeable crypto assets and distributes rewards to customers whose assets were part of the pool. The SEC claims that Coinbase failed to register this offering as required by law.
However, according to the press release, the SEC’s complaint seeks injunctive relief, disgorgement of ill-gotten gains, penalties, and other equitable relief.
Coinbase’s legal battle with the SEC highlights the increasing scrutiny faced by cryptocurrency exchanges and the need for compliance with securities regulations. As the case unfolds, the outcome will undoubtedly have significant implications for the entire crypto industry.
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