SEC Files Lawsuits Against Binance and Coinbase
The United States Securities and Exchange Commission (SEC) has filed lawsuits against Binance and Coinbase, two major cryptocurrency exchanges, accusing them of multiple securities violations and unregistered operations. The SEC alleges that both exchanges engaged in unregistered offers and sales of crypto asset securities and other investment schemes. In the case of Binance, the charges include failure to register its platforms as an exchange or a broker-dealer clearing agency and failure to restrict U.S. investors from using Binance.com. The SEC also claims that Binance.US engaged in wash trading through its market making trading firm, Sigma Chain. In the case of Coinbase, the SEC alleges that it operated as an unregistered broker, exchange, and clearing agency simultaneously.
The lawsuits also highlight concerns about the commingling of funds and assets. The SEC claims that funds from Binance and Binance.US were commingled in an account controlled by Binance’s CEO Changpeng Zhao. Similarly, the SEC accuses Coinbase of commingling different functions that are typically separated in traditional securities markets, such as brokers, exchanges, and clearing agencies.
SEC Chair Gary Gensler emphasized that both exchanges misled investors about their risk controls and manipulated trading volumes while concealing important information. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains with interest, and financial penalties against Binance, CZ, Coinbase, and its affiliates.
Both Binance and Coinbase have responded to the lawsuits, with Binance.US calling the SEC’s claims baseless and vowing to vigorously defend itself. Coinbase’s Chief Legal Officer called for crypto-specific legislation and criticized the SEC’s enforcement approach without clear rules for the digital asset industry.
The lawsuits have caused a negative impact on the crypto market, and the stock price of Coinbase fell after the news of the SEC’s suit against the company. The SEC has identified several tokens, including Solana, Cardano, Polygon, and Filecoin, as securities in the lawsuits against both Binance and Coinbase.
Overall, the SEC’s lawsuits against Binance and Coinbase highlight the regulator’s efforts to enforce securities laws in the cryptocurrency industry and address concerns related to investor protection, regulatory compliance, and the distinction between securities and digital assets.