SEC Lawsuits Against Binance and Coinbase: Recap and Latest Updates

The past week will certainly have been one of the most eventful for the crypto industry in 2023. Coinbase and Binance, two of the major platforms in the crypto industry are being sued by the SEC. Back to these major events that add a little more pressure to an already pressured crypto market.

First lawsuits against Binance: the SEC plays spoilsport

This week, the SEC potentially bought itself a reputation for witchcraft by taking on two behemoths of the American crypto industry. Indeed, the regulator formalized, Monday, June 5, legal proceedings against Binance, thus joining the CTFC which had been the first to attack the exchange.

The regulator’s grievances against the crypto firm essentially boil down to three words: accumulation of funds. The SEC criticizes Binance for accounting lightness consisting in confusing the funds it manages.

These accusations specifically target user funds that are allegedly mixed with those of the company. A lack of financial rigor that would allow the company to divert customer deposits as it pleases. These would then be transferred to Sigma Chain, an entity owned and controlled by Changpeng Zhao, the boss of Binance.

The complaints against Binance and its boss are not the only ones. To these, the SEC also criticizes continuing to allow US customers to trade on Binance.com. This, contrary to statements by the company. Not to mention, adds the regulator, that the latter would contravene the standards concerning the “securities”. Indeed, for the SEC, ADA and 60 other listed cryptos would be securities, unlike XRP, Ripple’s native crypto.

In total, 13 counts are brought against Binance and its entities. Reasons which justify, according to the stock market policeman, the freezing of the assets of the crypto firm. Procedure that the SEC will also initiate Wednesday, June 7, barely two days after the formalization of the proceedings against the company.

Then attacks against Coinbase: the SEC sows panic

While the crypto community has not yet recovered from the blow linked to Binance: rebelote. Tuesday, June 6, it is Coinbase’s turn to find itself in the dock of the SEC. Like Binance before it, the crypto firm is criticized for an accumulation, this time of function.

In essence, the SEC accuses Coinbase of combining several services which stock market practice would like them to be separated. The charges specifically target the exchange, intermediation and clearing agency services that Coinbase offers. Three functions that the company exercises without being authorized to do so.

Coinbase was quick to react to these accusations. “We are proud to represent the industry in court to finally get some clarity on the rules around cryptocurrencies”said with force of conviction Brian Armstrong, the boss, in a long tweet.

In it he adds: “In case it wasn’t obvious, the Coinbase lawsuit is very different from the others. The complaint filed against us focuses exclusively on what is or is not a title. We trust our facts and the law.” A bold replica that heralds an all-out war on crypto regulation.

Moreover, the firm would have potentially won a first battle against the SEC. Because, in the hours following Coinbase’s response, a shocking revelation leaked on Twitter. Gary Gensler, the head of the SEC, is allegedly involved in market manipulation. This, after placing more than $2.5 million in short BTC with a view to making a profit. Coinbase did not specifically confirm this information. The defendant did not react to these allegations either. But it is undeniable that if it is proven, the legitimacy of Gary Gensler, already flayed, would be truly compromised.

And now, what should we expect?

What we can take from these recent events is that with his lawsuits in sight, the next few months promise to be eventful for the crypto industry. Will Binance and Coinbase win the legal war now? It is perhaps still too early and uncertain to speculate on the question.

What is certain and visible, however, are the first consequences of these developments. These obviously have a direct impact on the Binance and Coinbase crypto platforms. With regard to the latter, their trading volumes are not particularly affected.

But their native cryptos are seeing significant declines valued at at least 10% of their respective valuations. Not to mention that Coinbase’s COIN stock lost nearly 15% of its value in the process. While Binance, it could see its situation, already very delicate on the market, worsen a little more.

These declines are linked to recent revelations from the rating agency Moody’s. The company notably reduced its outlook for Coinbase. These went from stable to negative. “The change in outlook from ‘stable’ to ‘negative’ reflects the uncertain extent of the impact the SEC charges will have on Coinbase’s business model and cash flow,” Moody’s justifies itself in a report it published recently.

But the major effect of the SEC attacks on Binance and Coinbase is on bitcoin (BTC). The crypto plunged to $25,000, its lowest level since March 2023. Now the question is whether the asset will quickly regain momentum to confirm the hopes placed in it. The queen of cryptos is not the only crypto to experience such a setback. Almost all leading cryptos in the industry are experiencing a similar fate, realizing losses between 10 and 25%.

The situation is generating so much concern that the brokerage platform Robinhood has delisted some cryptos from its platform. This is particularly the case with Cardano (ADA), Polygon (MATIC) and Solana (SOL). Assets declared as securities by the SEC. In this context, will the already particularly tough bear market strengthen? Only experts can answer!