Coinbase Global (COIN) shares slumped Tuesday after the U.S. Securities and Exchange Commission charged the crypto trading platform with operating as an unregistered broker, exchange and clearing agency.
The SEC said that Coinbase Prime, which directs trade orders to various platforms -- including the Coinbase Wallet -- has been operating an unregistered broker since at least 2019.
“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chairman Gary Gensler.
“In other parts of our securities markets, these functions are separate. Coinbase's alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest.”
"Further, as we allege, Coinbase never registered its staking-as-a-service program as required by the securities laws, again depriving investors of critical disclosure and other protections,” Gensler added.
The SEC filed its lawsuit against Coinbase in federal court in Manhattan just 24 hours after it published a damning set of allegations against Binance, the world's biggest crypto exchange. The agency accusing it of being part of a "web of deception" that skirted U.S. laws, commingled client funds and mislead investors and regulators.
The regulator also added 12 digital coins that it deems now as "unregistered securities", expanding its purview to around $115 billion of cryptocurrency assets as it tightens it grip on the murky global market.
Coinbase shares were marked 19.5% lower in early Tuesday trading to change hands at $47.50 each, a move that would trim the stock's year-to-date advance to around 34.2%.
Bitcoin prices stabilized in overnight trading, but remain within touching distance of a two-and-a-half month low, following the SEC's moves against Binance and Coinbase. Bitcoin was last seen trading 1% lower on the session at $25,475.40 each, marking its year-to-date gain at around 53%
