© Reuters
By Geoffrey Smith
Investing.com — The United States ratcheted up the heat on the crypto industry on Wednesday, as regulators sued Justin Sun, founder of , and several of his celebrity promoters, and threatened to do the same with Coinbase ( NASDAQ :).
The Securities and Exchanges Commission (SEC) has formally charged Justin Sun with illegally distributing tokens such as Tronix and , and manipulating the market to give the impression of stability and liquidity.
The SEC has also indicted a handful of celebrities paid by Sun to promote the assets on social media, including actress Lindsey Lohan and rapper Soulja Boy. Soulja Boy is one of only two celebrities who have not settled the charges.
In addition, the SEC sent a so-called “Wells” notice to Coinbase, the largest cryptocurrency exchange still operating in the United States, stating that it intended to take enforcement action against it as well, on the grounds that it would have illegally distributed unregistered titles.
Coinbase stock, which has already lost 70% since going public in 2021, fell another 10% in post-trade trading. and other digital assets were more robust, losing no more than 3%. This was largely due to support from cryptocurrency enthusiasts who are betting on the collapse of the traditional financial system as the Federal Reserve rose again on Wednesday.
“Based on discussions with staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s cash market, the Coinbase Earn staking service, Coinbase Prime and Coinbase Wallet” , Coinbase said in a document.
Staking services in particular, with their often high returns and reliance on the efforts of other people rather than investors to generate value, have been in the SEC’s crosshairs for years, but oversight is growing. increased considerably in the months following the collapse of FTX. Kraken, the rival exchange, shut down its staking service in February and agreed to pay $30 million for not registering it with the SEC.
Coinbase management, however, was unfazed by this development.
“While we understand this is all part of the journey to reform our financial system, we are right on the law, we are confident in the facts, and we welcome the opportunity for Coinbase (and by extension the community. crypto) to end up in court,” Coinbase CEO Brian Armstrong said on Twitter (NYSE:).
For more than a decade, Coinbase and others in the industry have successfully exploited the turf war between the SEC and the Commodity Futures Trading Commission (CFTC) over who has the power to regulate them. While the CFTC views cryptoassets as commodities, the SEC views them as securities, a view that has gained traction with the growing popularity of staking services.
A Wells notice does not always lead to charges or signal that the recipient has broken the law.