SEC lawsuits against Binance and Coinbase: what are the differences between the two cases?

The SEC has filed lawsuits against Binance and Coinbase respectively. The US stock market policeman’s grievances against these crypto industry behemoths are serious. However, the issues are not the same for each of them.

Almost similar SEC lawsuits for Binance and Coinbase

Legal proceedings against Binance and then Coinbase. This week, the SEC reached a new milestone in the regulatory policy it executes against crypto firms. The institution is indeed attacking two of the largest crypto firms in the world in terms of capitalization.

To these, she accuses of misleading users for the sole purpose of filling their pockets. Rather serious allegations that the SEC will obviously have to prove in a trial. But for now, his legal actions bring the crypto industry into disrepute.

The least we can say is that these companies play a big part in this story. Perhaps Binance more than Coinbase. And that is the difference between these two cases. Because if the SEC attacks these two crypto firms, it is with fundamentally different motives. Indeed, the lawsuits against Binance and Coinbase are a priori similar. The SEC accuses the two companies of using accumulation in carrying out their activities.

The SEC notably criticizes Coinbase for combining its exchange, intermediation and clearing agency services. A policy that would not be consistent with stock market practice. “In other parts of our securities markets, these functions are separated”said the SEC about it.

Particularly significant risks for Binance

This accumulation of activity, the SEC also blames Binance. The only big difference is that it does not concern the functions of the firm, but the money of the investors it manages. Here too, stock market practice dictates that the company’s funds are kept separate from those of the clients.

This strategy guarantees not only the security of the funds invested, but above all the credibility of the company. And it is the latter that is now at stake. Because unlike Coinbase, the SEC is directly questioning Binance’s reputation by accusing it of fraud.

For Federica Pantana, lawyer at Davidoff Hutcher & Citron, this is a big problem for Binance. ‘Cause a business may never recover “fraud or similar complaint”. The year 2023 is already particularly difficult for the company.

With this complaint from the SEC, it is no longer safe from a collapse in its operational performance. This was the case in the first quarter which saw Binance lose its hegemony in the crypto market.