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Coinbase hit with SEC lawsuit as crypto crackdown intensifies
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The Securities and Exchange Commission has filed a lawsuit against Coinbase for operating as an unregistered broker.
This comes as the second major regulatory action in two days targeting a prominent crypto firm, following the SEC's suit against Binance and its founder on Monday, June 5.
The SEC's move reflects Chair Gary Gensler's efforts to exert regulatory control over the entire cryptocurrency industry.
Read More: SEC sues Binance for alleged illegal use of customer funds
The commission has been focusing on enforcing its regulations on prominent players rather than just peripheral companies and currencies.
Unlike the lawsuit against Binance, the SEC's complaint against Coinbase does not name CEO Brian Armstrong as a defendant or allege mishandling of customer funds.
Coinbase criticized the SEC's "enforcement-only approach" and called for transparent legislation instead.
Analysts suggest Coinbase is in a challenging position, with limited alternatives beyond defending its operations in court.
The company's stock and bonds experienced significant declines following the SEC's announcement.
Read More: Former Coinbase manager settles SEC insider trading charges
The SEC claims Coinbase traded at least 13 crypto assets that should have been registered as securities and subject to regulatory scrutiny.
The company was allegedly required to register as an exchange, brokerage, and clearing agency.
Coinbase allowed trading 254 digital tokens on its platform, including well-known assets like Solana, Cardano, and Filecoin.
The SEC argues Coinbase deprived investors of necessary disclosures and protections, exposing them to significant risks.
Additionally, the SEC classified Coinbase's staking program, Coinbase Earn, as an unregistered security, contradicting the company's stance.
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Coinbase went public in April 2021 and is one of the few publicly traded crypto companies.
Major shareholders include Vanguard, Fidelity, and Morgan Stanley.
The increased scrutiny from regulators could jeopardize over a third of Coinbase's revenue.
Despite the regulatory challenges, Coinbase has been expanding internationally, launching operations in Bermuda, and hiring personnel in Singapore, Brazil, and Canada.
The SEC's lawsuit against Coinbase highlights its determination to regulate the crypto industry, setting the stage for potentially significant changes in the regulatory landscape.
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