SEC sues Coinbase, one day after taking aim at Binance
In a resounding escalation of Washington’s crackdown on cryptocurrency firms, the Securities and Exchange Commission accused the largest crypto exchange in the United States of operating as an unregistered securities broker, putting investors at risk of fraud and manipulation.
The federal regulator’s lawsuit against Coinbase marked the second blow in back-to-back enforcement actions targeting the industry’s largest and most widely known players. The broadening legal maneuvers strike at the heart of how these firms operate, piercing the regulatory gray area where companies have enjoyed staggering growth and where crypto fortunes were made and lost.
On Monday, the SEC sued Binance, the world’s largest crypto exchange, alleging that it violated securities laws and made false statements to investors.
On Tuesday, the SEC accused Coinbase of performing the functions of a securities exchange, broker, and clearing agency — entities that have expansive reporting requirements — since at least 2019. The lawsuit, filed in US District Court for the Southern District of New York, asked for unspecified civil penalties along with the forfeiture of any ill-gotten gains, as well as a permanent injunction from violating SEC rules.
Binance and Coinbase operate on different ends of the regulatory spectrum, shaping the tandem lawsuits into a powerful message to the industry. Binance claims no physical headquarters or jurisdiction, while Coinbase is publicly traded and incorporated in Delaware.
“Coinbase’s alleged failures deprive investors of critical protections, including rule books that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC,” the commission’s chairman, Gary Gensler, said in a statement.
The company balked at what it called the “SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry,” saying it is hurting the nation’s economic competitiveness.