SEC chair Gary Gensler has long called on crypto exchanges to register or face enforcement action.īut the demand creates a catch-22 of sorts that threatens viability in the US of crypto assets that are deemed securities: Gensler demands that crypto exchanges register with the SEC, but the exchanges claim there is no means of doing so. “Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them.”Īny exchange that supports the trading of securities must first register with the SEC-a process that comes with various reporting and diligence requirements. Grewal, director of the SEC’s enforcement division, in a public statement.
“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. The SEC also accuses Coinbase of violating securities law in connection with its staking service, which lets customers earn profits on certain crypto holdings by pooling them and locking them up. Based on that interpretation, the suit, filed in the Southern District of New York, accuses Coinbase of knowingly operating an unregistered securities exchange by selling tokens, including Sol, Ada, and Matic, to US investors. That means they fall under its purview, the regulator says. John Ray III, the bankruptcy expert who succeeded Bankman-Fried as the head of FTX as part of its winding-up process, told a congressional hearing on Tuesday that he had “never seen such an utter lack of record keeping” as he did at the exchange, which had “absolutely no internal controls whatsoever”.The SEC’s latest complaint doubles down on its long-standing assertion that many crypto tokens are simply securities, as defined under existing laws in the US. The various charges include multiple counts of wire fraud and securities fraud, campaign finance violations, and money-laundering offences.īankman-Fried was denied bail in the Bahamas, where he is being held pending extradition to the US. The jitters over Binance came as Sam Bankman-Fried, the founder and chief executive of FTX, once Binance’s chief rival, was charged by the SEC, CFTC, and Department of Justice for his role in the catastrophic failure of his crypto exchange. In a tweet, Zhao said the company would be doing an independent audit on liabilities, but that “liabilities are harder”, adding: “We don’t owe any loans to anyone. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply. For more information see our Privacy Policy. Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. Withdrawals of USDC, a “stablecoin” that is widely seen as one of the safest assets in the sector, since it is issued by a US-based company that complies with financial regulators and pegged to the US dollar, were paused for more than eight hours over the course of Tuesday. We passed this extreme stress test because we run a very simple business model – hold assets in custody and generate revenue from transaction fees.”īut the outflow came after Binance was forced to halt withdrawals in one particular cryptocurrency because, Zhao said, the company could not fulfil them until its American banking partners opened for business. In a statement from Binance, the company said: “We think that it’s important to note that yesterday’s market sell-off resulted in approximately $1.14bn being withdrawn from our platform in a 12-hour period, which was managed with ease. Zhao insisted that Tuesday was not even in the top five days for net withdrawals. “I actually think it is a good idea to ‘stress test withdrawals’ on each CEX on a rotating basis,” he added, with a biceps curl emoji.
Some days we have net withdrawals some days we have net deposits. “We saw some withdrawals today,” Zhao tweeted on Tuesday.
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