The U.S. Securities and Exchange Commission (SEC) has filed more charges against Coinbase, Inc., accusing the cryptocurrency exchange of operating as an unregistered national securities exchange, broker, and clearing agency. In addition, Coinbase has been charged for failing to register its crypto asset staking-as-a-service program.
According to the SEC, Coinbase has allegedly facilitated the buying and selling of crypto asset securities unlawfully since at least 2019, generating billions of dollars in revenue. The complaint states that Coinbase has combined the functions of an exchange, broker, and clearing agency without obtaining the necessary registrations required by law.
The alleged actions by Coinbase include:
- Providing a marketplace that brings together buyers and sellers of securities, utilizing established methods for order interaction.
- Conducting securities transactions for Coinbase customers.
- Offering facilities for comparing settlement data of crypto asset securities transactions, acting as an intermediary in settling these transactions, and serving as a securities depository.
- The SEC argues that Coinbase’s failure to register has deprived investors of important protections, including oversight by the SEC, recordkeeping obligations, and safeguards against conflicts of interest.
Furthermore, the SEC complaint alleges that Coinbase’s holding company, Coinbase Global Inc. (CGI), which controls Coinbase, shares liability for certain violations.
In addition to the unregistered exchange and clearing agency charges, Coinbase has been accused of conducting an unregistered securities offering through its staking-as-a-service program. This program enables customers to earn profits through “proof of stake” mechanisms on specific blockchains.
Coinbase pools customers’ stakeable crypto assets, validates blockchain transactions, and shares a portion of the rewards with participating customers. Coinbase failed to register this staking program as required by securities laws.
SEC Chair Gary Gensler expressed concerns over Coinbase’s alleged commingling and unlawful offering of exchange, broker-dealer, and clearinghouse functions. Gensler emphasized that such functions should be separate in other parts of the securities markets and highlighted the critical investor protections that Coinbase’s actions have potentially deprived investors of.
The complaint seeks various remedies, including injunctive relief, disgorgement of unlawfully obtained gains plus interest, penalties, and other equitable relief.
Just yesterday the SEC filed 13 cases against Binance that led to severe backlash from the crypto community. Binance was quick to release a strong defensive response to charges filed by the SEC. However, there has been no response yet to the new allegations made by the SEC.
