Breaking: US SEC Sues Coinbase Exchange Following Binance Lawsuit

In a surprising turn of events, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase, one of the leading cryptocurrency exchanges based in California. This legal action comes just a day after the SEC initiated a lawsuit against the world’s largest crypto exchange Binance. The regulatory agency accuses Coinbase of operating as an unregistered broker, exchange, and clearing agency, raising concerns about potential violations of financial regulations.

SEC Files Lawsuit Against Coinbase

The SEC’s complaint, based on information obtained, alleges that Coinbase has been functioning as an unregistered broker since at least 2019. The exchange is accused of soliciting potential investors, handling customer funds and assets, and charging transaction-based fees without obtaining the necessary registration.

Read More: Who Will Win, US SEC Or Crypto Giant Binance?

Furthermore, the SEC claims that Coinbase has operated as an unregistered exchange, providing a marketplace that brings together buyers and sellers of various crypto assets and executing transactions without proper authorization. Additionally, the complaint states that Coinbase has operated as an unregistered clearing agency, holding customers’ assets in Coinbase-controlled wallets and facilitating transactions by debiting and crediting relevant accounts.

According to the documents submitted to the court, the regulatory agency alleged that the decade-old cryptocurrency exchange engaged in illicit practices to generate profits and was quoted as saying:

Coinbase has earned billions of dollars in revenues by, among other things, collecting transaction fees from investors whom Coinbase has deprived of the disclosures and protections that registration entails and thus exposed to significant risk

SEC Targets Coinbase’s Staking Program

Notably, the lawsuit also targets Coinbase’s crypto asset staking program which offered investors the opportunity to earn financial returns through its managerial efforts regarding certain blockchain protocols. However, the SEC argues that Coinbase conducted the offering and sale of securities without registering the program.

Another significant point of contention raised by the SEC are the services offered by the exchange, one of which is the Coinbase Prime and the other Coinbase Wallet. According to Coinbase, the services helped the platform in routing orders for crypto assets to the Coinbase Platform or third-party platforms, but the SEC asserts that it operated illegally, without authorization and behaved similarly to an unregistered broker.

Binance CEO Chimes In Against SEC

Although the Coinbase team has yet to issue an official response, the CEO of Binance, Changpeng Zhao, expressed his disapproval of the SEC indirectly through a tweet. In light of the extensive crackdowns and lawsuits initiated by the SEC, Zhao suggests that the SEC may be at fault, as it seems inclined to engage in conflicts with almost everyone in the crypto space.

If you have to pick a fight with everyone, maybe you are the one at fault. 🤷‍♂️

— CZ 🔶 Binance (@cz_binance) June 6, 2023

Coinbase, which recently went public in a highly anticipated direct listing, may now face substantial legal consequences if found guilty of the SEC’s allegations. As of the time of this writing, the pre-market value of Coinbase stock experienced a significant decline, plummeting by 16% in a matter of minutes upon the announcement, and is presently being traded at roughly $49.27.

Also Read: SEC Takes Aim At Binance’s Ex-CCO For Willful Violation Of US Regulations