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Just a day after Binance, the Securities and Exchange Commission (SEC) has charged US crypto exchange Coinbase for allegedly violating federal securities law.
The SEC warned Coinbase that it could soon sue back in March, when it issued a Wells Notice. In its lawsuit issued on Tuesday, Coinbase is accused of operating an unregistered broker, exchange, and clearing agency. The complaint says the firm “never registered with the SEC” to provide these functions, “thus evading the disclosure regime that Congress has established for our securities markets.”
The firm’s listed tokens along with its Prime, Wallet, and staking products were identified by the SEC as alleged violations of securities law. Coinbase is accused of knowingly listing high risk assets that “had the characteristics of securities,” the lawsuit added.
“To realise exponential growth of the Coinbase Platform and boost its own trading profits, Coinbase made the strategic business decision to add crypto assets to the Coinbase Platform even where it recognized the crypto assets had the characteristics of securities.”
What’s more, the commission claims that it failed to protect investors against fraud and conflicts of interest.
“Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC,” he said.
Ten US states hit Coinbase with show cause order
The SEC sued crypto exchange Binance on Monday for violating securities law. In its suit, it labelled ten cryptocurrencies as securities that the firm had listed: BNB, solana, polygon, cardano, binance USD, cosmos, decentraland, axie infinity, sandbox, and COTI.
In the SEC’s suit against Coinbase, it identified solana, cardano, polygon, sandbox, file coin, axis infinity, chiliz, flow, internet computer, near, voyager, dash, and nexo as securities — adding seven new securities to its list.
COINBASE SIMULTANEOUSLY RECEIVES SHOW CAUSE ORDER FROM TEN STATES: AL, CA, IL, KY, MD, VT, NJ, SC, WA, AND WI.
— DIRTY BUBBLE MEDIA: GRIND SLOW, GRIND FINE (@MikeBurgersburg) June 6, 2023
28 DAYS TO CEASE AND DESIST ORDER, LADIES AND GENTS. $COIN
h/t @nikhileshde https://t.co/pXOgclJgL2 pic.twitter.com/2fygJ5lkmX
Read more: Binance lawsuit adds another 10 cryptos to SEC securities list
Following the news, 10 US states have issued a show cause order to Coinbase in a multi-state task force. It gives Coinbase 28 days to show why it shouldn’t be directed to cease and desist from selling unregistered securities in Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.
Coinbase stock fell 9% on Monday following news of Binance’s lawsuit. In premarket trading on Tuesday, COIN fell 22%.
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