Coinbase, a major player in the cryptocurrency exchange sector, saw its stock fall by almost 20% as Tuesday’s trading opened. This plunge followed a lawsuit filed against the company by the Securities and Exchange Commission (SEC), alleging that Coinbase operated as an unregistered exchange and broker.
SEC’s Allegations Against Coinbase
According to the lawsuit lodged in a federal court, the SEC claims Coinbase violated securities laws by failing to register with the regulatory body before starting operations in the US. The crypto firm is accused of functioning as an exchange, a broker, and a clearing agency, all without registering as such with the SEC.
SEC Chair Gary Gensler stated in a press release, “Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.” Coinbase has yet to respond to these allegations.
As of March 31, Coinbase, the largest crypto asset trading platform in the US, held over $130 billion in assets on its platform, as reported by the company itself.
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Crypto Space in Turmoil
This lawsuit filed against Coinbase comes hot on the heels of a similar lawsuit the SEC filed against Binance Holdings, the world’s largest crypto exchange. Binance was accused of similar violations, including failure to register as an exchange, broker, or clearing agency.
The crypto industry has been in a state of chaos since the collapse of FTX late last year. Once valued at $32 billion, the renowned crypto exchange unraveled in the fall of 2022 amid growing revelations of alleged fraudulent activity. Sam Bankman-Fried, FTX’s former CEO, now faces criminal charges for allegedly misappropriating billions in FTX customer funds and deceiving investors.
Despite these upheavals, Coinbase remained a viable option for investors to purchase cryptocurrency easily, especially as bitcoin’s value doubled from its November position, breaking the $30,000 mark again before experiencing a dip this week.
