Coinbase (COIN) stock fell nearly 15% in midday trading on Tuesday as the Securities and Exchange Commission sued the crypto exchange, alleging it was acting as an unregistered exchange and broker.
The SEC alleged in a lawsuit filed in federal court that the crypto company violated securities law by failing to register with the SEC before operating in the United States. Specifically, the SEC states that Coinbase acted as an exchange, broker, and clearing agency, without registering with the agency.
“Coinbase’s alleged failures deprive investors of essential protections, including rules that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC,” the statement said. SEC Chairman Gary Gensler in a statement.
Coinbase, the largest crypto asset trading platform in the United States, held more than $130 billion in assets on its platform as of March 31, according to the company.
“The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry hurts the economic competitiveness of the United States and companies like Coinbase that have demonstrated a commitment to compliance. The solution is legislation that allows fair rules for the road to be made transparently and applied equally, no litigation. In the meantime, we will continue to operate our business as usual,” Paul Grewal, Director Legal and General Counsel
Tuesday’s SEC complaint comes a day after the SEC filed a lawsuit against Binance Holdings, the world’s largest crypto exchange. This lawsuit claimed similar violations by Binance, including the crypto trading platform’s failure to register as an exchange, broker, or clearing agency.
The crypto space has been in turmoil since the collapse of FTX late last year. The popular crypto exchange, once valued at $32 billion, plummeted throughout the fall of 2022 as a growing number of details of alleged fraudulent activity came to light. Former FTX CEO Sam Bankman-Fried now faces criminal charges that he stole billions of funds from FTX clients and misled investors.
Coinbase was one of the remaining options for investors to buy cryptocurrency easily, as bitcoin roughly doubled from November and broke through the $30,000 mark again before falling this week.
David Hollerith of Yahoo Finance contributed to this article.
Josh is a reporter for Yahoo Finance.
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