Coinbase, one of the leading cryptocurrency exchanges, has been charged by the Securities and Exchange Commission (SEC) for operating as an unregistered national securities exchange, broker and clearing agency. The SEC also accused Coinbase of failing to register its crypto asset staking-as-a-service program. The complaint alleges that since 2019, Coinbase has facilitated the buying and selling of billions of dollars’ worth of crypto asset securities without proper registration, combining the functions of an exchange, broker, and clearing agency.

The SEC claims that Coinbase’s failure to register has deprived investors of essential protections such as SEC inspection, recordkeeping requirements, and safeguards against conflicts of interest. The charges also extend to Coinbase’s holding company, Coinbase Global Inc., as it is considered a control person and thus liable for some of Coinbase’s violations.

Additionally, the SEC alleges that Coinbase conducted an unregistered securities offering through its staking-as-a-service program. This program allows customers to earn profits through blockchain transaction validation services. Coinbase allegedly pooled customers’ stakeable crypto assets, performed the necessary validations, and rewarded customers with a portion of the generated rewards. The SEC states that Coinbase failed to register these offers and sales as required by law.

Just yesterday, the SEC filed a lawsuit against Binance and its CEO CZ, alleging that the exchange violated securities laws, brazenly dodged regulation by the SEC and did not properly inform their consumers. The combination of lawsuits within two days indicate a major effort by U.S. regulators to set a new tone for regulation and application of securities law to digital assets.

SEC Chair Gary Gensler criticized Coinbase’s alleged deprivation of critical protections for investors. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, accused Coinbase of deliberately refusing to follow the federal securities laws, noting that the consequences for the investing public are significant.

Like the SEC’s complaint against Binance, the regulator seeks injunctive relief, disgorgement of ill-gotten gains, penalties and other equitable relief. The investigation was conducted by the SEC’s Crypto Assets and Cyber Unit, with the assistance of the San Francisco Regional Office and the multi-state task force of ten state securities regulators.

Coinbase has not yet responded publicly to the charges. The outcome of this case will have significant implications for the regulation of cryptocurrency exchanges in the United States and could be a major shift for the growth of the industry in the country. It’s important to note that SEC Chair Gary Gensler is on record as differentiating Bitcoin from cryptocurrencies at large, saying that bitcoin alone is a commodity. Bitcoin-focused enterprises and individual users should not feel at-risk of regulation akin to the securities-focused actions seen this week.

Source link

The U.S. Securities and Exchange Commission (SEC) has filed a complaint against cryptocurrency exchange Binance, accusing the company of violating federal securities laws.

The SEC alleges that Binance, the world’s largest cryptocurrency exchange platform, unlawfully solicited U.S. investors to trade crypto asset securities on its platforms, Binance.com and Binance.US. Per the complaint, Binance engaged in unregistered offers and sales of securities and made false representations to investors regarding surveillance and controls over manipulative trading.

According to the SEC’s claim, Binance and its subsidiary, BAM Trading, operated as an exchange, broker-dealer and clearing agency without registering with the SEC. The commission also alleges that Binance conducted unregistered offers and sales of its own cryptocurrency assets, as well as profit-generating programs and investment schemes. Specifically, the charges focus on the BNB and BUSD cryptocurrencies launched by Binance, as well as the BNB Vault and Simple Earn programs, “and a so-called ‘staking’ investment scheme available on the Binance.US Platform.” The defendants are accused of depriving investors of material information about these securities and programs.

Furthermore, the complaint states that Binance and BAM Trading made misrepresentations about the controls implemented on the Binance.US platform, raising significant amounts of money from private investors. The SEC asserts that Binance evaded U.S. laws and regulation by implementing a plan to surreptitiously escape registration requirements. “As Zhao himself acknowledged—Binance did not want to ‘be held accountable’ for these actions,” the filed charges explain. “As the Binance CCO explained, ‘[o]n the surface we cannot be seen to have US users[,] but in reality, we should get them through other creative means.’”

In a response to the SEC’s complaint, Binance expressed disappointment and emphasized its active cooperation with the SEC’s investigations. Binance stated that it had engaged in extensive discussions to reach a settlement but that the SEC chose to act unilaterally. The company said it intends to vigorously defend its platform and criticized the SEC’s enforcement approach, calling for more clarity and guidance for the digital asset industry. Binance also refuted allegations that user assets on the Binance.US platform were at risk, assuring customers of the safety and security of their funds.

The SEC seeks various remedies and resolutions, including a permanent injunction, disgorgement of ill-gotten gains, civil money penalties and equitable relief. 

Source link

Cryptocurrency exchange Binance is facing a U.S. probe over suspected violations of sanctions against Russia, according to a media report. The inquiry is looking into whether the trading platform was used by Russians to circumvent financial restrictions imposed over Moscow’s invasion of Ukraine.

Crypto Exchange Binance Faces Another US Probe, Sources Say

The U.S. Department of Justice (DOJ) is trying to establish if Binance Holdings, the operator of the world’s largest crypto exchange, has been used to allow Russians to evade Western sanctions, Bloomberg revealed, quoting multiple sources familiar with the matter.

According to five people who chose to remain anonymous, the Department’s national security division is looking at whether the company or its officials have violated restrictions introduced in relation to Russia’s invasion of Ukraine as part of a confidential investigation.

“The probe, which hasn’t previously been reported, is moving on a parallel track with an existing inquiry by the criminal division, one of the people said,” the report detailed, noting that the move adds another layer of scrutiny of the troubled industry’s leading exchange.

The news comes after Russian crypto media reports in late April suggested that Binance has quietly lifted some restrictions on Russian users. According to the information published by different news outlets, Russians can again use their bank cards to make deposits and the trading platform has canceled a limit on their balances introduced in compliance with EU sanctions.

Binance has been in talks with the DOJ in an attempt to resolve complaints related to previous allegations that it was used to bypass sanctions against Iran before introducing stricter compliance controls, Bloomberg added, quoting another person familiar with these developments. In a statement, the company emphasized it complies fully with all U.S. and international sanctions, elaborating:

In 2021, Binance launched an initiative to completely overhaul its corporate governance structure, including bringing in a world-class bench of seasoned executives to fundamentally change how Binance operates globally.

It also pointed out that its know-your-customer protocols rival any in the traditional banking system and every Binance user is required to pass these procedures which include verifying country of residence and checking personal identification.

“Our policy imposes a zero-tolerance approach to double registrations, anonymous identities, and obscure sources of money,” the exchange stressed. The U.S. Justice Department has so far declined to comment.

Binance has been in the focus of other U.S. investigations, including a probe into its compliance with anti-money laundering requirements led by the Internal Revenue Service and a lawsuit filed by the Commodity Futures Trading Commission. The Securities and Exchange Commission has been examining if the platform supported the trading of unregistered securities.

What are your thoughts on the report about another investigation against Binance in the United States? Share them in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.