Coinbase Chief Says SEC ‘Tone’ Changed Ahead of Lawsuit
Coinbase’s CEO says the SEC changed its attitude toward his company before the regulator’s recent lawsuit.
“We had many discussions within the last year when their tone started to change,” Brian Armstrong said in an interview with Bloomberg News Wednesday (June 7).
“They started to come to us with more questions about the business, so we were very forthcoming. Unfortunately we were met with silence.”
The Securities and Exchange Commission (SEC) filed suit against Coinbase on Tuesday (June 6), accusing the company of making “billions of dollars unlawfully facilitating the buying and selling of crypto asset securities.”
In a statement to PYMNTS soon after the filing, Coinbase Chief Legal Officer and General Counsel Paul Grewal criticized the regulator for its “reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry.”
One day earlier, the SEC had taken action against crypto giant Binance, accusing the company and its founder of a weaving an “extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.”
PYMNTS examined the case against Coinbase in a report on the SEC’s crackdown Wednesday, noting a “worrying” element of the lawsuit: if the SEC wins, Coinbase — which generated more than 80% of its 2022 revenue in the U.S. — will find its business model threatened.
“That’s because, compared to its peer exchanges, Coinbase is the squeaky-clean, good kid in class,” PYMNTS wrote.
“The exchange is a public U.S. company listed on the Nasdaq and incorporated in Delaware. The firm already files extensive financial disclosures with the SEC and is subject to regular audits by accounting firms.”
With that in mind, the report said, the SEC’s complaint against the company is “laser-focused” on the fact that Coinbase has not registered as a securities exchange, even though the regulator contends that it is operating as one.
“If the SEC wins and the majority of cryptocurrencies are defined in court as securities, the asset class will become more or less banned in the U.S.,” PYMNTS wrote.
In his Bloomberg interview, Armstrong expressed confidence that it will be his company that comes out on top.
“I think we’re gonna be fine going to the court,” he said, pointing out that Coinbase has upwards of $5 billion on its balance sheet to maintain operations and cover legal fees. “Even if this takes some time, that’s OK.”
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