The Securities and Exchange Commission sued cryptocurrency platform Coinbase on Tuesday, charging the company with operating an unregistered securities platform and brokerage service.
The lawsuit comes a day after the SEC filed charges against Binance, the world's largest crypto exchange, and its founder Changpeng Zhao are accused of misusing investor funds, operating as an unregistered exchange and violating a slew of U.S. securities laws.
Coinbase shares plunged nearly 20 per cent in early morning trading on the news.
In its complaint, the SEC said Coinbase made billions in being the middle man for cryptocurrency buyers and sellers but did not give investors lawful protections while acting as a broker.
“Coinbase has for years defied the regulatory structures and evaded the disclosure requirements that Congress and the SEC have constructed for the protection of the national securities markets and investors,” the SEC said in its complaint, which was filed in U.S. District Court for the Southern District of New York. It seeks injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.
Coinbase did not immediately respond to a request for comment.
The SEC had warned Coinbase in March that it could face securities charges and had long signaled that Coinbase had been flouting securities laws with its position that cryptocurrencies were not securities and therefore did not need to register as a broker.
“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a statement.
U.S. prosecutors and the SEC charged FTX’s founder Sam Bankman-Fried with a host of money laundering, fraud and securities fraud charges in December. His criminal trial is likely to be in the fall.