The US Securities and Exchange Commission (SEC) has sued the crypto exchange Coinbase for acting as an unregistered broker.
The SEC has been aggressively cracking down on the crypto businesses in 2023. Today, Coinbase became the latest target of its agenda against the crypto ecosystem.
Coinbase Operating Without Registration With the SEC
According to SEC’s court filings, Coinbase merged three functions of a broker, exchange, and clearing agency under a single umbrella. SEC alleges that the exchange operated as an unregistered broker since 2019.
The regulators accused Coinbase of violating the securities rules by offering the staking program that allows investors to earn using Coinbase’s “managerial efforts.” Lastly, SEC claimed that Brian Armstrong’s company offered unregistered trading services for certain crypto assets securities.
Through the lawsuit, the SEC declared Cardano (ADA), Chiliz (CHZ), Solana (SOL), Axie Infinity (AXS), Filecoin (FIL), Internet Computer (ICP), Flow (FLOW), NEAR Protocol (NEAR), Polygon (MATIC), Voyager Token (VGX), The Sandbox (SAND), and Dash (DASH) as securities.
Impact on Price
After the release of the court filings, almost all of these mentioned tokens have fallen by 1-3% in the following hour. Moreover, according to data from Coinglass, $9.85 million worth of trades have been liquidated in the past 1 hour.
The community heavily criticized the due diligence process of the regulators. Crypto influencer Miles Deutscher wrote on Twitter:
“So, let me get this straight. The SEC says that ‘Coinbase has operated as an unregistered broker since 2019.’ Yet Coinbase IPOd in April 2021. So you’re telling me that the SEC let an ‘unregistered broker’ IPO – after carrying out due diligence? Well done Gary.”
Yesterday, the SEC launched a lawsuit against another crypto exchange Binance. It alleged that Binance operated an unregistered trading entity and misdirected investors’ funds.
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