The SEC launched a double-edged attack on cryptocurrency giants Coinbase Global Inc (NASDAQ: COIN) and Binance this week, accusing both entities of violating securities rules and engaging in deceptive practices. SEC Chair Gary Gensler doubled down on the allegations in a Tuesday interview with CNBC.
What Happened: The SEC filed a lawsuit against Coinbase Tuesday in federal court, sending its shares down more than 15% in early trading. The legal action comes one day after the SEC filed suit against Binance and its CEO Changpeng Zhao.
According to the SEC, Coinbase has, since 2019, raked in billions by unlawfully facilitating crypto asset securities transactions. The company is accused of flouting registration requirements as it juggled multiple financial roles typically handled separately under traditional securities rules.
"The investing public has the benefit of the U.S. security laws; crypto should be no different, and these platforms need to come into compliance and protect the investing public," Gensler said Tuesday.
Notably, the SEC is targeting Coinbase's staking-as-a-service program, alleging the company did not register its offerings and sales as required by law.
Binance, the world's largest cryptocurrency exchange, was not spared from the SEC's broadside. The regulatory watchdog accused Binance of operating a "web of deception" and artificially inflating its trading volumes, diverting customer funds, failing to restrict U.S. customers from its platform, and misleading investors about its market surveillance controls.
As Gensler puts it, "Trading platforms, they call themselves exchanges or are commingling a number of functions, which in traditional finance - we don't see the New York Stock Exchange also operating a hedge fund."
The SEC chair casted doubts on the true value of crypto tokens and urged full, fair and truthful disclosures, insisting on adherence to U.S. security laws.
"If there's a real value in these crypto tokens, then compliance will build trust and the business model might change."