Shares of Coinbase are plunging 18% ahead of the opening bell on Thursday after the cryptocurrency trading platform received a warning from the Securities and Exchange Commission that it could face securities charges.
The cryptocurrency trading platform said in an SEC filing that it had received a Wells notice from the agency, which indicates the regulator believes laws protecting investors were violated.
Among the practices targeted by the SEC is “staking”, which is “Coinbase Earn” by the company.
Users of the trading platform can stake their cryptocurrency by essentially locking up some of their assets in exchange for payment later, such as earning an interest rate on a savings account. Those assets are used by platforms such as Coinbase Global Inc. to guarantee other transactions that take place on the blockchain.
The SEC says that Coinbase and other platforms must register as a securities platform to offer such services, and only after being approved by the SEC’s Division of Corporate Finance.
The Wells notice to Coinbase is another warning shot from SEC Chairman Gary Gensler attempting to establish the agency’s oversight of crypto firms when they stray into areas typically associated with banking.
Kraken, a rival crypto exchange platform, agreed in February to settle for $30 million and stop offering stake as a service.
Coinbase CEO Brian Armstrong sent several tweets criticizing the SEC late Wednesday.
“The legal process going forward will provide an open and public forum before an impartial body where we will be able to make clear for all to see that the SEC has not only been fair, reasonable, or even demonstrated seriousness of purpose when it comes to does not. for its involvement on digital assets,” Armstrong tweeted.
In a blog post, Coinbase Chief Legal Officer Paul Grewal said the SEC case was a “disappointing development.”
“Rest assured, Coinbase products and services will continue to operate as usual,” Grewal said.
New York in January announced a $100 million settlement with Coinbase over what state officials called significant failures in the cryptocurrency trading platform’s system to find possible criminal activity.
Under the terms of the settlement, the San Francisco company agreed to pay a $50 million fine to New York State and invest another $50 million in its compliance program. An independent monitor set up by the state will work with Coinbase for one year to oversee compliance.
That same month, Coinbase announced it was cutting roughly 20% of its workforce, or about 950 jobs, in its second round of layoffs in less than a year. Coinbase announced the elimination of 1,100 jobs, or about 18% of its global workforce, in June in the first round of cuts.
Coinbase was founded in 2012 and does not have any headquarters. It went public in April 2021 by directly listing its stock and bypassing the traditional process of hiring underwriters.
The cryptocurrency has been on a tear this year after falling severely in 2022. Bitcoin climbed 3% to $27,700 on Thursday and is now up 68% in an era of mass layoffs in the tech sector and widespread concern about the stability of US banking. Area.
Source: finance.yahoo.com
