Coinbase Global, Inc. (NASDAQ: COIN) has witnessed a sharp decline of nearly 15% in midday trading today. The reason behind this plummet is a lawsuit filed by the Securities and Exchange Commission (SEC) against the crypto exchange. The SEC alleges that Coinbase acted as an unregistered exchange and broker, violating securities law.
The lawsuit, filed in federal court, accuses Coinbase of not registering with the SEC before operating in the United States. The SEC claims that Coinbase functioned as an exchange, a broker, and a clearing agency without the required registration.
SEC Chair Gary Gensler issued a statement, highlighting the repercussions of Coinbase’s alleged failures. He stated, “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.”
Coinbase, the leading crypto asset trading platform in the US, had over $130 billion in assets on its platform as of March 31, according to the company’s records.
Responding to the SEC lawsuit, Paul Grewal, Coinbase’s Chief Legal Officer and General Counsel, criticized the SEC’s enforcement-only approach and emphasized the need for clear rules in the digital asset industry. Grewal called for legislation that allows transparent development and fair application of rules, rather than relying solely on litigation. He affirmed that Coinbase would continue to operate its business as usual while awaiting resolution.
This SEC complaint against Coinbase follows a similar lawsuit filed against Binance Holdings, the world’s largest crypto exchange, just a day ago. The allegations against Binance also involve failure to register as an exchange, broker, or clearing agency.
The crypto space has been shaken since the collapse of FTX in late 2022. FTX, once valued at $32 billion, faced allegations of fraudulent activity, leading to its unraveling. Former CEO Sam Bankman-Fried now faces criminal charges for alleged embezzlement of billions in customer funds and misleading investors.
Coinbase’s position as a reliable option for investors to easily purchase cryptocurrencies has been undermined by these recent developments. Despite Bitcoin’s recent surge, reaching the $30,000 mark once again before a recent decline, the turmoil in the crypto industry continues to impact market confidence.