After accusing cryptocurrency exchange Coinbase of irregularly listing nine cryptocurrencies, the United States Securities and Exchange Commission, the SEC, opened an investigation against the platform. According to a report by Bloomberg on Tuesday (26), the SEC suspects that the publicly traded company allowed its US users to trade unregistered securities. Therefore, it is investigating some of the tokens listed on the platform.
SEC targets Coinbase tokens
Last week, as CriptoFácil reported, the SEC claimed that nine digital assets available on Coinbase are actually securities. The tokens in question are: AMP (AMP); Rally (RLY); DerivaDEX (DDX); XYO(XYO); Rari Governance Token (RGT); LCX (LCX); Powerledger (POWR); DFX Finance (DFX) and Kromatika (KROM). According to the SEC, a token can be classified as a security asset. For this, it is enough that this token is classified as an “investment contract”. That is, on the basis that the asset constitutes an investment in a common enterprise, with an expectation of profit derived from the efforts of others. Despite this, Coinbase Chief Legal Officer Paul Grewal told CoinDesk that he is confident in this case: “We are confident that our rigorous due diligence process – a process that the SEC has already reviewed – keeps securities off our platform and we look forward to engage with the SEC on the matter.”
Coinbase alleges lack of clarity
Also according to the report, SEC scrutiny of Coinbase has increased since the platform expanded its number of tokens. Today, there are over 200 tokens available in Coinbase’s asset directory. If the SEC is able to consider these tokens as securities, the exchange will need to register with regulatory bodies. SEC Chairman Gary Gensler has previously said that he believed Coinbase should register as a national stock exchange given some of the cryptocurrencies listed. However, it appears that neither the DoJ nor the CFTC (Commodity Futures Trading Commission) agree with the SEC in this case. CFTC Commissioner Caroline D. Pham, for example, said the move to investigate the nine so-called security tokens could have “far-reaching implications for future legal and consumer disputes.” Meanwhile, Coinbase asks the SEC for more clarity. As the exchange highlighted, the regulator does not provide clear rules for defining how cryptocurrencies can be considered securities.
Insider trading case on Coinbase
The case is apparently linked to the arrest of the exchange’s former product manager, Ishan Waji, which took place on July 21. According to the charges, Wahi used privileged information to obtain about R$5.7 million in illicit gains. Ishan Wahi, his brother Nikhil Wahi and their friend, Sameer Ramani, are accused of promoting a scheme involving precisely the listing of tokens. Ishan was warning Nikhil about which tokens Coinbase would list before the company disclosed the fact. Then Nikhil and Ramani would buy the tokens and make huge profits when Coinbase publicized their listings. Also Read: MotoGP Signs Sponsorship With Blockchain Solutions Company Also Read: Crypto Winter Will Not Affect Wider Financial Market, Says IMF Also Read: Total Cryptocurrency Users Could Reach 1 Billion by 2030, Report Reveals
