SEC Sues Coinbase For Running Unregistered Securities Exchange, Brokerage and Clearing Agency
The Securities and Exchange Commission today charged Coinbase, Inc. with operating an unregistered national securities exchange, broker, and clearing agency, as well as failing to register the offer and sale of its crypto asset staking-as-a-service program.
The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that Coinbase and CGI violated certain registration provisions of the Securities Exchange Act of 1934 and that Coinbase violated the securities offering registration provisions of the Securities Act of 1933.
The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.
According to the SEC, since at least 2019, "Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities."
"Coinbase’s failure to register has deprived investors of significant protections, including inspection by the SEC, recordkeeping requirements, and safeguards against conflicts of interest, among others."
“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler.
"Further, as we allege, Coinbase never registered its staking-as-a-service program as required by the securities laws, again depriving investors of critical disclosure and other protections,” Gensler was quoted as saying.
"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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
"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,” Grewal added.
SEC also claims that coins such as SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH and NEXO are securities, per court filing.