Crypto Listings: Selling Unregistered Securities? – Coinbase Appears to Face SEC Probe | news

• Negative sentiment in the crypto market – Coinbase announces layoffs
• Ex-Coinbase employees investigated for insider trading

• SEC likely to launch investigation into sale of unregistered securities

As Bloomberg reports, the Securities and Exchange Commission (SEC) has launched an investigation into Coinbase for selling unregistered securities to US citizens.


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Negative headlines weigh on Coinbase

This is just one of a series of bad news in recent times. Coinbase is currently suffering from the negative sentiment in the crypto market in general, which is why the crypto exchange announced in mid-June that it would drastically reduce the number of employees. About 18 percent of employees will need to be laid off to survive in the event of a prolonged economic downturn, according to Coinbase CEO Brian Armstrong. In addition, the New York State Attorney’s Office recently stated in a press release that investigations are currently underway against a former Coinbase employee. Former product manager Ishan Wahi is said to have given his brother and a friend confidential information about upcoming crypto listings, which they exploited and reportedly made a profit of around $1.5 million.

SEC Investigation: Securities Trading?

This is now supplemented by the report on the investigation by the US Securities and Exchange Commission. Coinbase is facing an investigation into whether the company improperly allowed Americans to trade digital assets that should have been registered as securities, Bloomberg reports, citing three people familiar with the matter. The SEC’s review of Coinbase has begun after the platform expanded the number of tokens it offers for trading, said two people who asked not to be named because the investigation was not made public. Should the tokens offered by Coinbase be classified as securities, it would mean that the trading platform would have to register as an exchange with the SEC.

Coinbase denies claims

Coinbase itself pointed out in a blog post that it would not list any securities. The company said that following a Justice Department investigation into insider trading on July 22, the SEC filed separate securities fraud charges against the suspect related to his wrongdoing. “The SEC alleges that nine of the digital assets involved are securities,” Coinbase said in its release. However, the Ministry of Justice has decided not to press charges for securities fraud.

“Seven of the nine assets listed in the SEC’s allegations are tradable on Coinbase’s platform,” Coinbase said in its release, but none of those assets are securities. “Coinbase has a rigorous process to analyze and review each digital asset before it is made available on our exchange – a process that the SEC itself has reviewed,” Coinbase said. According to the company, this process “includes an analysis of whether the asset can be considered collateral and also considers regulatory compliance and information security aspects of the asset.”

Coinbase also criticized in the blog post that the SEC did not seek dialogue but went straight to litigation, noting that the United States does not have “a clear or workable regulatory framework for digital assets.” “And instead of creating tailored rules in an inclusive and transparent way, the SEC is relying on this type of one-off enforcement to try to bring all digital assets under its jurisdiction, even those assets that aren’t securities,” Coinbase said.

The crypto trading platform, meanwhile, has filed a rulemaking request with the SEC calling for actual rulemaking to give the cryptocurrency securities market a chance to thrive, the company also explained in its blog post.

It remains to be seen what the outcome of the SEC’s investigation will be.


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