Coinbase sued by SEC for breaking US securities rules

The Securities and Exchange Commission sued Coinbase Global Inc. in federal court in New York on Tuesday, alleging the crypto firm for years broke its rules. 

The regulator said in a 101-page complaint that Coinbase, the largest US crypto platform, evaded regulations by letting users trade numerous crypto tokens that were actually unregistered securities. Coinbase fell 15% to $50 at 8:52 a.m. in New York.

The move comes the day after the SEC sued Binance, the world’s largest crypto platform, for a wider set of violations as part of a growing crackdown that could push digital currencies back to the fringes of the US financial system. The SEC on Monday alleged Binance and its chief executive, Changpeng Zhao, mishandled customer funds, misled investors and regulators, and broke securities rules.

Coinbase didn’t immediately reply to a request for comment.

“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” SEC Chair Gary Gensler said in a statement.

The SEC is seeking an order that would require Coinbase to comply with securities laws, and give up what the agency says were ill-gotten gains.

Bloomberg reported in July that Coinbase was under SEC investigation. On March 23, the company said it had received a warning notice from the regulator about a coming enforcement action.

The SEC also accused Coinbase on Tuesday of breaking the agency’s rules with its staking service. That product lets customer turn over their crypto tokens to facilitate transactions on a blockchain, which then pays a return to the customer. –BLOOMBERG