Coinbase Offers a Fiery Response To SEC's Threat of Enforcement Action (cnbc.com) 49
Crypto exchange Coinbase offered a fiery response on Thursday to last month's Wells notice from the SEC, telling the federal regulator that an enforcement action against the crypto exchange would pose "major programmatic risks" to the SEC that would "fail on the merits." From a report: "Coinbase does not list, clear, or effect trading in securities," the company's response said. The analysis SEC did staffers to justify an enforcement action "appears to rest on superficial and incorrect analogies to products and services offered by others," Coinbase wrote in a blog post from chief legal officer Paul Grewal. Separately, Grewal told CNBC, "At the time when we went public we had detailed discussions with the SEC about the very aspects of our business that are now -- two years later -- the subject of the Wells notice. Nothing has changed."
The SEC indicated to Coinbase in a March wells notice that its spot trading, staking, custody and institutional trading businesses were at risk. The SEC's warning to Coinbase noted that the regulator would allege Coinbase was offering and selling unregistered securities, in violation of federal law. The SEC has used unregistered offering and sale violations to force other crypto exchanges to close services in the U.S., including the crypto exchange Kraken's staking-as-a-service product.
The SEC indicated to Coinbase in a March wells notice that its spot trading, staking, custody and institutional trading businesses were at risk. The SEC's warning to Coinbase noted that the regulator would allege Coinbase was offering and selling unregistered securities, in violation of federal law. The SEC has used unregistered offering and sale violations to force other crypto exchanges to close services in the U.S., including the crypto exchange Kraken's staking-as-a-service product.
"Nothing has changed" (Score:3)
Haven't about a thousand new coins been created? Don't some of these coins sold by Coinbase satisfy the Howie test---making them securities?
It seems crazy to say that nothing has changed in two years in a tech where people regularly claim "we're still early!"
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Its the same old thing as other new tech companies claiming falsely that they not like the old companies and therefore old rules don't apply to them. Just like everyone knows Uber is a taxi service, it is not "ride share". If you buy and hold with a company in an attempt to increase value, then it's effectively a security exchange. If you buy and hold gold at GoldRUsTraders.com then it's a security, but if you keep it under your mattress then it's not a security. Nothing about being "new" changes the ru
Re:"Nothing has changed" (Score:4, Informative)
1) An investment of money
2) In a common enterprise
3) A reasonable expectation of profit
4) Derived from the efforts of others
Bitcoin doesn't meet element 3 or 4, so it's not a security. For other created coins, the SEC is basically saying, "prove they aren't securities, we aren't going to do that work for you." The SEC is going with the assumption that Coinbase is trading securities, and making it up to Coinbase to prove they aren't.
IMO this is a reasonable approach. Coinbase might be able to succeed, but they should be able to demonstrate that they are following proper regulations.
Re:"Nothing has changed" (Score:5, Informative)
Bitcoin may arguably not meet the criteria, but some of the ancillary businesses Coinbase runs sound very similar to the actual scheme W.J. Howey Co were up to.
If you go to https://www.coinbase.com/earn [coinbase.com] you're greeted with a page promising
So if you buy some land (crypto) and lend it to us, we'll grow oranges (lend it out, stake it, etc.) and return the profits.
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lol I hope not (Score:2, Insightful)
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I think there's a decent amount of FUD involved. Coinbase says they're trading crypto coins, which may or may not be securities, which is true. But the SEC seems to actually be interested in their ancillary businesses, not the actual coin trading.
W.J. Howey Co came up with the idea of people buying land in Florida, leasing it to the company, then the company would grow oranges and pay some profits back to the lessors. Leasing land from someone isn't normally a security, so they didn't register their scheme
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My specific example is the US Supreme Court case that provided the Howey Test, which is used in the US to define a security.
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Either way, it seems to me that it would be improper to punish Coinbase for not complying with regulations when it has been unclear which regulations apply and which authority does the regulating. Straighten that out and apply the rules going forward, not retroactively.
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In that case surely Coinbase needs to accept they are going to need to deal with regulation and provide a clear argument of which one they come under.
Right now there are too many people in crypto believing they are beyond the cover of regulation.
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IMO this is a reasonable approach.
But it's not in the US. It's up to the SEC to prove they committed a violation, not CoinBase to prove they didn't.
It's a fundamental tenet of all law in the US.
They're fighting for their lives (Score:5, Interesting)
If they can't get the SEC off their backs they'll have to flee to one of the more corrupt nations, where sooner or later their real assets (e.g. USD Cash) will be seized by whichever dictator's in charge at the moment while also being shut out of most of the global banking system.
I say good riddance. I don't want this stuff integrated into my economy. It's not even decentralized, having centralized around the exchanges, mining pools and "stake" holders. It's a completely failed experiment. And the "too big to fail" banks would love nothing more than to use it to build their own "crypto backed securities" and do another 2008. No thank you.
Re:They're fighting for their lives (Score:5, Insightful)
There was a time when the SEC didn't exist you know, go read a book. The SEC doesn't save anyone from their own mistakes (they're way too slow for that), they exist to save the rest of us from the consequences borne from your mistakes. Like the Great Depression.
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The irony here is that based on his post, it appears he has read a book.
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Which one?
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https://www.amazon.com/Rise-Mr... [amazon.com]
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You don't have a right to do something incredibly boneheaded when the consequences will also affect broader society. Because of that it's illegal to sell high risk investments to people who clearly don't know any better even if those people who don't know any better say they want to buy them anyway.
It's the same reason why local munic
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The SEC does nothing for people who have already been scammed, all they can do is shut down frauds before anyone else gets scammed. The SEC is a regulatory body with civil jurisdiction. They can only issue enforcement actions against companies and fine their officers (sometimes banning them from being officers in the future). The people who were already scammed have to sue on their own. The DOJ (FBI) has criminal jurisdiction, meaning they do the jail thing. Again, nothing for people who were already defr
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The hell are you talking about?
It's pretty clear. Read carefully for once.
The point isn't to save people from their mistakes the point is to stop people from being able to make those mistakes in the first place.
So, why create a regulatory agency that cannot do that, but instead soaks up a bunch of taxpayer money while simultaneously failing to protect anyone? Instead it mostly just gets used as political ban-hammer.
Not because we care if you're sick but we care if you get us sick
*Yawn* You act like every situation is a Typhoid Mary crisis. Same shit during CV19 while you overworked on trying to justify all the mandates (because you are an authoritarian asshole). The fact is the analogy is weak and stupid when applied to the SEC. It's n
Re:They're fighting for their lives (Score:5, Insightful)
Given that unlike the 60s and 70s, securities are held by most citizens, directly or indirectly via pension funds. Having securities and wanting them to be safe is NOT a special interest.
The free market has proven time and time again that it cannot and will not police itself. Left to its own devices the free market fails. Even the godfather of the free market ideas, Adam Smith, stated this unambiguously.
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Having securities and wanting them to be safe is NOT a special interest.
Securities mostly include stocks and bonds. Obviously there is risk in holding them just like every commercial about securities tells you it "involves the risk of loss." Having an SEC just makes people think "Oh the authorities have checked this out and now it's safe". Again this is why Ponzi got caught in under a year by the market, and Bernie Madoff got away with his scam for decades with your pals the SEC on the job. It's not effective.
Re:They're fighting for their lives (Score:4, Insightful)
By your logic, this means the "Market" missed Bernie Madoff for decades as well, as the SEC existing does not mean the "Market" does not. And yeah, get rid of the regulator whose primary purpose is to keep people from getting ripped of. In this era of electronic trading and settlement, that can happen instantaneously to millions on entities at once. And once a nefarious actor has someones funds, it is time consuming if not impossible to get them back.
But I am sure that everyone is equally suited and as thoroughly capable as you are, thus we do not need any sort of framework to to keep the more rapacious entities in check.
Nobody missed Bernie Madoff (Score:2)
The SEC isn't perfect and is a fuck ton of regulatory capture going on. That means there's a good chance if you're a small investor or even a moderate sized one you're going to get your ass handed to you by a scam they're ignoring. I mean for Chr
Re: Nobody missed Bernie Madoff (Score:3)
20/20 hindsight vision is a wonderful thing.
If you knew, you could have shorted him and become a billionaire. But since nobody did, I'm going to wager it wasn't as clear cut as some people claim after the fact.
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By your logic
Helpful tip: Don't tell other people what their logic is if you have such poor critical thinking skills that you cannot even figure out what logic is or what they are saying. Start with a rational thesis and build up from there, son.
the SEC existing does not mean the "Market" does not.
When the government comes out and says "Don't worry, we'll prevent scammers from scamming" with agencies like the SEC and FDIC, the government becomes part of the problem when they fail to do just that. They gave the taxpayers a false sense of security which gets people to lower
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You can open a Coinbase account for free, you will find that you need to do KYC steps.
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There is zero scrutiny to any Coinbase KYC to open an account and make deposits. Withdrawing cash is a different story. Then they delay, delay and delay some more for some reason.
Coinbase willfully lists known frauds like Tether and they're about to get crushed.
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We all know USDT is based on shenanigans. What's funny is the Feds have never stopped them.
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As a company that has the criminal element as a significant portion of their user base, this "fiery response" to the SEC seems extremely mild.
"Do what we want or you'll find yourself swimming with the... kids down at the YMCA... ya, that's the ticket!"
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I say good riddance. I don't want this stuff integrated into my economy.
I do. And I'm a US citizen who votes and contributes to campaigns. Are you a US citizen who votes and contributes to campaigns?
Re:They're fighting for their lives (Score:5, Informative)
That nicely sums it up. Incidentally, crapcoins are pretty much dead in the EU already. If I read the current regulation correctly, all exchange customers will need to be identified on the same level that banks do within 18 months. The only sane thing to do. Large-scale money-laundering only promotes crime (as the ransomware epidemic nicely shows) and serves no good purpose.
Wanting to keep the ponzi scheme going? (Score:2)
If there had been government oversight instead of boardroom orgies at FTX, then maybe not so many people wouldn't have lost billions because of Carolines bad investments.
And in the end the only thing she thought of was ratting our SBF in order to get away with it.
Start the war (Score:3)
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You can posture and make claims all you want, but assuming the SEC has what it needs to prosecute this, start the trial. If they don't, then they should sit down and shut up until they do(which they inevitably will because CoinBase).
Las Vegas (Score:2)
If this doesn't work out, Coinbase can always join the ranks of aging performers who are tired of touring, legalized gambling, and sports teams from Oakland. I think they'd fit right in. Just carry on business as usual online, but no longer allowed in some states like California in particular.
Crypto really is just a pure gamble.
I used to think it might be fun for the Casinos to have an explicit ponzi game that you can join, they could punch it up with fake ads and stuff, promos, free drinks when you buy i
Criminals goes off on Cops (Score:3)
Yeah, that will work as legal defense... (Score:2)
Looks like they have nothing.