Crypto Billionaires Lose Big Amid SEC’s 2023 Crackdown on Binance and Coinbase
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Crypto billionaires have been hit hard by the Securities and Exchange Commission’s crackdown on Binance and Coinbase, incurring huge losses so far this week.
Binance CEO Changpeng Zhao, known as CZ, has seen his net worth shrink by $1.4 billion to $26 billion, while Coinbase CEO Brian Armstrong has seen his net worth drop by $361 million to $2.2 billion, according to the Bloomberg Billionaires Index.
This marks a reversal in fortune for crypto’s wealthiest founders, who saw their combined net worth increase by $15.4 billion in 2023 from the comeback in the price of Bitcoin and other digital assets.
Specifically, Zhao’s fortune was up by a staggering 117% before this week’s decline, while Armstrong’s was up by 61%.
By comparison, the other billionaires on Bloomberg’s wealth index were up a combined 9%.
Bitcoin’s partial comeback this year was largely due to the expectations that the decreasing inflation as well as the US banking crisis that erupted in March would lead the Federal Reserve to hit a pause on rate increases.
That is because lower interest rates can stimulate economic growth and may lead investors to seek higher returns from riskier assets such as cryptocurrencies and stocks.
However, this may not matter if US regulators make it harder for the industry to operate or make it difficult for Americans to trade.
SEC Files Charges Against Both Binance and Coinbase
The SEC has sued both Binance, the world’s largest cryptocurrency exchange, and Coinbase, the largest US-based cryptocurrency, over the past two days.
The commission filed 13 charges against Binance and its US affiliates, ranging from allegedly operating as an unregistered exchange to offering unregistered securities.
The regulator also levied similar charges against Coinbase, claiming that it operated as an exchange, broker, or clearing agency without the required registrations.
The lawsuit against Coinbase came after the SEC sent a “Wells notice” to the company in March, threatening the crypto exchange with legal actions regarding some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
In response to the complaint, Senator Cynthia Lummis lashed out at the SEC, claiming the agency not only failed to provide a path for crypto exchanges to register but also failed to provide legal guidance on what constitutes a security.
“The SEC’s continued reliance on regulation by enforcement continues to harm consumers,” she said, recommending that the agency instead create a “robust legal framework that exchanges can comply with.”
My statement on the SEC suing Coinbase, inc. https://t.co/5KNEM0IPSV pic.twitter.com/EgRIxrIcjj
— Senator Cynthia Lummis (@SenLummis) June 6, 2023
Meanwhile, in an interview with CNBC Squawk Box shortly after the agency announced charges against Coinbase, SEC Chair Gary Gensler said crypto firms need to be compliant with securities laws.
“I think the crypto industry more broadly if it’s gonna have any success going forward has to come into compliance with basic public policies about disclosure, about avoiding conflicts, about properly segregating customer funds, and guarding against fraud manipulation.”
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