Second SEC Lawsuit Against Crypto in Two Days
The Wall Street Journal reports SEC Sues Coinbase, Alleges It Is Unregistered Broker.
The SEC alleged that Coinbase, the largest crypto exchange in the U.S., violated rules that require it to register as an exchange and be overseen by the federal agency.
Mark Palmer, an analyst at Berenberg Capital Markets, said Coinbase “is between a rock and a hard place.” “Coinbase is now facing a situation where it has to defend in court most of its operations and its only alternative is to pivot, which is extremely difficult,” Palmer said. Coinbase generated more than 80% of its 2022 revenue in the U.S.
The SEC alleged that Coinbase traded at least 13 crypto assets that are securities and should have been registered with regulators before they were issued. Registration typically involves giving investors financial statements and detailed risk disclosures that are reviewed by regulators.
Because Coinbase made those tokens available for trading, and because the SEC alleges they are securities, the company was required to register as an exchange, brokerage and clearing agency, the SEC said.
“Coinbase has earned billions of dollars in revenues by, among other things, collecting transaction fees from investors whom Coinbase has deprived of the disclosures and protections that registration entails and thus exposed to significant risk,” the SEC said.
The SEC also labeled the Coinbase Earn staking program, which allows investors to earn interest on their tokens, as an unregistered security. Coinbase has previously maintained that its staking products aren’t securities.
Coinbase Bond Collapse to Deep Junk
- The company’s 3.375% notes due in 2028 recently traded at 59 cents on the dollar, down from 64.5 cents on Monday, according to MarketAxess.
- The bonds are now trading at a yield of more than 10 percentage points above Treasury bonds.
Who Knew?
The SEC Seeks to Freeze Binance Assets, Bitcoin Dives Six Percent
Yesterday, I commented The SEC Seeks to Freeze Binance Assets, Bitcoin Dives Six Percent
Crypto assets are down across the board today as as SEC filing says Binance ran an illegal crypto exchange that commingled client funds to a third party owned by Zjao, the Binance founder.
SEC Filings
- Coinbase: 101-Page SEC Filing Against Coinbase.
- Binance: 136-page SEC Filing Against Binance
Mish Three-Point Binance Synopsis
- The SEC says Binance is an illegal, unregistered entity that repeatedly broke federal securities laws and commingled client funds into accounts and corporate relationships controlled by Zhao, Binance’s Chief Executive Officer.
- The SEC seeks to freeze all the assets at Binance
- The SEC seek to “disgorge their ill-gotten gains with prejudgment interest”
Get Out!
Regarding Calls to Shut It All Down
Key Lawsuit Difference
- The SEC accused Binance of illegally trading unregistered securities, commingling client funds, wash trading to inflate values, fraud, misrepresentation, purposeful evasion, and it went after Zhao, the founder of Binance, personally.
- The SEC primarily accuses Coinbase of illegally trading unregulated securities which it seeks to stop.
- The SEC seeks to freeze the assets of Binance, not Coinbase.
That’s a big difference.
In both cases, the SEC wants the companies to “disgorge their ill-gotten gains with prejudgment interest”.
SEC Chair Gensler Refuses to Say if Ether Is a Security During House Hearing
Bitcoin is a commodity. But what is Ethereum?
Numerous times, at a recent House hearing, SEC Chair Gary Gensler refused to answer point blank whether Ethereum was a commodity or a security.
Please play that video. It is very revealing.
The SEC charges Coinbase of trading illegal securities, but it refuses to say whether or not the second largest cryptocurrency is a security or a commodity.
Now the SEC accuses Coinbase of illegally trading 13 securities. How many of those, and in what timeframe, did the SEC notify Coinbase.
What’s It Really About?
In my Binance post, I stated “It is reasonably clear that Binance broke many security laws. But is that what’s this is really all about?“
Today’s SEC filing further suggests what I was referring to yesterday. The SEC wants to end crypto exchanges, period. It wants to promote Central Bank Digital Currencies.
Gensler refuses to say what is or isn’t a security or as best as I can tell, even provide general rules a company can take to decide for itself.
Study Hall Is Now Over
The biggest buy setup in history, that I caught in real time, but ignored, happened when Ben Bernanke was Fed chair.
Chairman Bernanke was asked his view on Bitcoin. He responded “We want to study Bitcoin“. Bitcoin was $300 at the time.
I cannot find that quote, but it is what Bernanke said. I recall thinking, “Wow, the Fed is going to leave this alone, for now.”
You can take my current observation for what it’s worth, if anything, but study hall is now over.
This post originated on MishTalk.Com.
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Mish
his excuse? My guess is that he’s from academia. The position of SEC
Chair may be, in fact, above his pay grade.”
commingling client funds, wash trading to inflate values, fraud,
misrepresentation, purposeful evasion.”