According to Bloomberg, Coinbase is being investigated by the US Securities and Exchange Commission (SEC). It’s because Coinbase allowed the trading of several tokens that should have been registered as securities.
“Coinbase does not list securities on its platform,” said Paul Grewal, Chief Legal Officer, on the Coinbase blog this Friday. Period.” The SEC’s investigation predated their investigation into an alleged insider trading scheme, which was made public a week ago.
To get a better idea of what we’re talking about, read our previous update, “Coinbase Product Manager Arrested On Insider Trading Charge.”
Crypto World’s First Ever Insider Trading Scheme
Ishan Wahi was a Coinbase product manager and fully involved in the company’s development team. Therefore, he had detailed knowledge of the Coinbase plans to add new crypto assets. In this capacity, he was aware of the precise dates on which the listing of these crypto assets would be made public. In addition, he abused his position within the company by disclosing confidential information about the crypto asset listings to either his brother, Nikhil Wahi or a friend, Sameer Ramani.
After receiving complete information from Ishan Wahi, Nikhil Wahi, and Sameer Ramani created anonymous digital wallets on Ethereum to purchase these crypto assets before Coinbase made the listing public. They were sold immediately following the public announcement for approximately $1.5 million in profit.
Seven Coins Included in the SEC’s Charges are Listed on Coinbase
“Coinbase has a rigorous process to analyze and review each digital asset before listing it on our exchange, which the SEC has reviewed.” This process includes determining whether the asset is a security and considering regulatory compliance and information security aspects of the asset.
Paul Grewal argued in a blog post, to be clear, the vast majority of assets we review do not end up on Coinbase.” Because of the novelty of cryptocurrency, authorities have found it difficult to distinguish which crypto assets are classified as securities and which are not.
Grewal confirmed in the same blog post that the SEC had no definitive regulatory framework for digital asset securities. He also urged the SEC to cooperate and issue clear-cut rules that are “desperately needed” to allow the crypto securities market to thrive.
Coinbase Global Inc Petitioned the SEC
Coinbase Global Inc. also petitioned the SEC on July 21st. The exchange requested that rules be developed for “digital asset securities.”
In addition, if the SEC enacted sensible regulation while encouraging the growth of the crypto market, the US would reap the benefits. Moreover, a lack of effective regulation is hampering the United States’ progress in digital asset innovation.
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