The lawsuit filed by the United States Securities and Exchange Commission against Coinbase Global on June 6 is raising questions about the exchange’s approach to managing the ongoing cryptocurrency crackdown.
In a recent interview with Cointelegraph, VC investor Kevin O’Leary criticized the strategy of Coinbase to deal with the current regulatory environment. “Their market capitalization was decimated [por la demanda de la SEC]and the board seems to want to keep taking on the SEC again and again,” the serial entrepreneur said in reference to the 17.4% drop in Coinbase shares last week. O’Leary added:
“I would think at this point, if you’re a shareholder in that company, you might want to make some changes. I don’t think this is working as a strategy. […] I am not optimistic about the management team. […] I think investors are done with this.”
Coinbase has been campaigning for clearer regulation for cryptocurrencies in the United States for months, amid increasing regulatory oversight. In a recent interview with The Wall Street Journal, Coinbase CEO Brian Armstrong said that the exchange met with the SEC more than 30 times in the last year without receiving any response on a path to compliance.
Mark Kornfeld, an attorney specializing in securities and regulation, told Cointelegraph that falling share prices due to regulatory activity, such as the SEC proceedings against Coinbase, are often used as a template for private lawsuits by alleged damages, as long as they involve misleading statements or omissions. “The problem, as always, is in the details of whether what is alleged is proven to have happened,” Kornfeld said.
According to corporate and securities attorney Roland Chase, aggrieved investors’ legal claims against Coinbase and its management could range from “whether the legal analysis Coinbase conducts each time it considers a crypto asset for listing is appropriate” to whether its disclosure of the risk factor to investors was adequate.
“Yeah [el análisis de cotización del token] is inappropriate, and management knew about it – or was reckless in not knowing about it – there may be a federal securities law claim against Coinbase and its management,” Chase continued.
Coinbase claims to have reviewed over a thousand assets, of which it rejected 90%. “We thought some of them might be securities or we had other questions about them. Actually, we only listed a very conservative small number of the assets out there,” Armstrong told the WSJ.
As for its information to investors, Coinbase’s filing with regulators in 2021 seemed predict what would likely be found in the future. The risk section of the presentation says:
“The status of a particular crypto asset as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to adequately characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines and other penalties, which may adversely affect our business, results of operations and financial condition.”
A legal dispute with regulators could take years in court and cost the exchange a significant amount of money. Ripple, which is currently in litigation over the alleged value status of XRP (XRP), has spent more than $200 million defending against the SEC lawsuit since 2020.
Cointelegraph contacted Coinbase but received no response.
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