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In a shocking development, the SEC filed suit against crypto exchange Coinbase on Tuesday, alleging it acted as an unregistered broker and exchange.On Tuesday, the US Securities and Exchange Commission (SEC), in its relentless pursuit of the crypto industry, <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.1.0.pdf" rel="noopener noreferrer nofollow">sued</a>crypto exchange Coinbase in a New York federal court. The agency alleges the exchange acted as an unregistered broker and exchange and is demanding that the firm be “permanently restrained and enjoined” from further doing so.The complaint comes less than a day after the agency <a href="https://cryptodaily.co.uk/2023/06/sec-sues-binance-and-its-ceo-changpeng-zhao" rel="noopener noreferrer nofollow">sued Binance and its CEO</a>, Changpeng Zhao.<h2 id="header-0">SEC: Coinbase Is an Unregistered Exchange, Broker, and Clearing Agency</h2>In a <a href="https://www.cnbc.com/2023/06/06/sec-sues-coinbase-over-exchange-and-staking-programs-stock-drops-14percent.html" rel="noopener noreferrer nofollow">press release</a>, the securities regulator said Coinbase acted as an unregistered securities exchange, broker, and clearing agency and charged it for “the unregistered offer and sale of securities in connection with its staking-as-a-service program.”The SEC details:<blockquote>Since 2019, Coinbase has been engaging in an unregistered securities offering through its staking-as-a-service program, which allows customers to earn profits from the “proof of stake” mechanisms of certain blockchains and Coinbase’s efforts.</blockquote>Through its unregistered services, the agency said Coinbase allegedly:<blockquote>Provides a marketplace and brings together the orders for securities of multiple buyers and sellers using established, non-discretionary methods under which such orders interact.</blockquote>Further, it states that Coinbase:<blockquote>Engages in the business of effecting securities transactions for the accounts of Coinbase customers.</blockquote>Finally, the SEC alleges that Coinbase:<blockquote>Provides facilities for comparison of data respecting the terms of settlement of crypto asset securities transactions, serves as an intermediary in settling transactions in crypto asset securities by Coinbase customers, and acts as a securities depository.</blockquote>The regulator further deems at least 13 crypto assets available to Coinbase users as “crypto asset securities”.<h2 id="header-1">Gensler and Grewal Comment</h2>Chairman of the SEC, Gary Gensler, <a href="https://twitter.com/GaryGensler/status/1666059466750541825" rel="noopener noreferrer nofollow">took to Twitter</a> to share the news.Gensler commented:<blockquote>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.</blockquote>Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, had this to say:<blockquote>You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great.As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them. While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled. Today’s action seeks to hold Coinbase accountable for its choices.</blockquote><h2 id="header-2">The SEC Appears to be Out for Blood</h2>The crypto market has been in free fall since news broke that the agency filed suit against crypto exchange Binance and its founder and CEO, Changpeng Zhao. The agency accused Binance of mishandling funds and lying to investors and regulators about its operations.Binance responded by denying the claims.Coinbase has been under the radar amid the SEC’s broader crackdown on unregistered securities.After the SEC and crypto exchange <a href="https://cryptodaily.co.uk/2023/02/kraken-agrees-to-shutter-staking-as-part-of-sec-settlement" rel="noopener noreferrer nofollow">Kraken</a> reached a settlement earlier in the year where the company agreed to shutter its staking program, Coinbase said they would <a href="https://cryptodaily.co.uk/2023/02/coinbase-more-than-happy-to-defend-staking-in-court-says-ceo" rel="noopener noreferrer nofollow">defend the agency’s classification of staking as a security</a>.Coinbase executives claim that staking cannot be classified as a security under the US Securities Act or the Howey Test.Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinbase sued by regulators as US squeezes crypto industry - latest updates

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