Coinbase Refutes Claims That it Lists Securities as SEC Kicks Off Investigation
Major crypto exchange Coinbase has denied allegations that it lists securities on its platform after the US Securities and Exchange Commission (SEC) embarked on an investigation over the listing of digital assets that should have been registered as securities.
In a recent blog post, Coinbase’s Chief Legal Officer Paul Grewal claimed that none of the listed assets on their platform are securities, adding that the process in which they determine whether a digital asset is a security or not has been reviewed by the SEC itself.
“Coinbase has a rigorous process to analyze and review each digital asset before making it available on our exchange — a process that the SEC itself has reviewed,” he said.
I’m happy to say it again and again: we are confident that our rigorous diligence process—a process the SEC has already reviewed—keeps securities off our platform, and we look forward to engaging with the SEC on the matter. A refresher: https://t.co/SaacvrZEiU— paulgrewal.eth (@iampaulgrewal) July 26, 2022
Grewal detailed that after the US Department of Justice (DOJ) launched an investigation into a former Coinbase employee’s misuse of confidential information related to listing decisions, the SEC separately filed securities fraud charges against the individual.
According to the DOJ, as reported, one former employee of the exchange violated insider-trading rules by leaking information to help his brother and a friend buy tokens just before they were listed on the platform, collectively generating “realized and unrealized gains totaling at least approximately [USD] 1.5 million.”
They traded at least 25 different crypto assets shortly in advance of listing announcements. The SEC alleges that nine cryptocurrencies involved are securities, Grewal said in the blog post, adding that the DOJ “reviewed the same facts and chose not to file securities fraud charges against those involved.”
In a recent tweet, the US Commodity Futures Trading Commission (CFTC) Commissioner Caroline Pham called the SEC’s probe “a striking example of ‘regulation by enforcement.” She said the SEC’s allegations “could have broad implications beyond this single case, underscoring how critical and urgent it is that regulators work together.”
“We agree with Commissioner Pham and, respectfully, 100% disagree with the SEC’s decision to file these securities fraud charges and the substance of the charges themselves,” Grewal stated.
Grewal said that the SEC’s charges highlight the important issue that the “US doesn’t have a clear or workable regulatory framework for digital asset securities.”
“And instead of crafting tailored rules in an inclusive and transparent way, the SEC is relying on these types of one-off enforcement actions to try to bring all digital assets into its jurisdiction, even those assets that are not securities,” he claimed.
Assuming this is true, I suspect the SEC is going to run into real challenges here just as it has with ripple for the simple fact that they literally approved the company’s s-1 and allowed them to go public. It’s not as though the SEC didn’t have these concerns at the time. https://t.co/FckYWitdUc— Collins Belton (@collins_belton) July 26, 2022
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