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Good morning, and welcome back to Tokengraph, your weekly source of all the most important events in cryptocurrency. This week, the SEC fired off two consecutive lawsuits against Binance and Coinbase. Let’s dive in and see what they’re all about, and whether they’re legitimate or not.
On today’s agenda:
Coinbase and Binance Sued
The SEC Seems to Want Crypto Control
Winklevoss: Dems Losing the Youth
Texas = Silicon Valley of Crypto?
FTX’s Customer List Still Hidden
And more…
The SEC has set its sights on two of the biggest names in crypto — but neither Binance nor Coinbase are backing down.
First, on June 5, Binance, a globally recognized cryptocurrency exchange, was slapped with a lawsuit by the United States Securities and Exchange Commission (SEC). The complaint, lodged in the District Court for the District of Columbia on June 5, includes 13 charges against the exchange and its U.S. subsidiary, Binance.US, as well as its CEO, Changpeng Zhao (CZ).
JUST IN: 🇺🇸 SEC seeks restraining order to freeze #Binance US assets.
— Watcher.Guru (@WatcherGuru)
Jun 6, 2023
The charges range from allegations of unregistered offers and sales of BNB and Binance USD tokens to claims that Binance operated illegally, failing to register as an exchange, broker, or clearing agency. Among these accusations, the SEC has raised concerns about Binance's operations and business practices.
The lawsuit underscores that Binance, BAM Trading — Binance.US's legal entity, and CZ have jeopardized investors' assets, enriched themselves, and engaged in fraudulent activities, including manipulative trading practices.
The SEC has gone after:
- Kraken Exchange
- Binance US
- Coinbase
- Cardano
- Algorand
- PolygonThe SEC has missed:
- FTX Exchange
- Sam Bankman Fried
- Meme coins— Altcoin Daily (@AltcoinDailyio)
Jun 7, 2023
The SEC seeks to halt Binance and CEO CZ from continuing their operations, recover illicit profits with interest, and impose financial penalties.
4.
Our team is all standing by, ensuring systems are stable, including withdrawals, and deposits.
We will issue a response once we see the complaint. Haven't seen it yet. Media gets the info before we do.
🙏 twitter.com/i/web/status/1…
— CZ 🔶 Binance (@cz_binance)
Jun 5, 2023
Coinbase Under SEC Scrutiny
Hot on the heels of the Binance case, the SEC filed a lawsuit against Coinbase, the New York-based cryptocurrency exchange, on June 6. The suit alleges that Coinbase operated as an unregistered securities exchange, broker, and clearing agency. Furthermore, the SEC contends that several tokens offered by Coinbase, such as Solana and Cardano, qualify as securities.
BREAKING: 🇺🇸 SEC sues Coinbase, citing the exchange is acting as an unregistered broker.
— Watcher.Guru (@WatcherGuru)
Jun 6, 2023
Coinbase, a publicly listed company, has been operating as an unregistered security broker since 2019, according to the SEC. This controversial claim has caused confusion within the crypto industry, considering that Coinbase went public in 2021.
SEC sues @coinbase for listing what they call securities. Coinbase has a license to list securities but the SEC won't let them activate it. ARE YOU FREAKING KIDDING ME????????????????????????????????????? ARE WE LIVING IN THE TWILIGHT ZONE???????
Congress???? @PatrickMcHenry… twitter.com/i/web/status/1…— Digital Asset Investor (@digitalassetbuy)
Jun 11, 2023
Additionally, the SEC claims that Coinbase's staking program constitutes an investment contract and thus, a security. Coinbase has rejected these allegations, maintaining that its staking products do not qualify as securities.
The @SECGov is weaponizing their role to kill an industry. Allowing a company to list publicly and then stonewalling their attempts to register is indefensible.
@GaryGensler, expect to hear from Congress.
— Senator Bill Hagerty (@SenatorHagerty)
Jun 6, 2023
Battle of Crypto Titans: Binance and Coinbase Respond
Binance.US and Binance have separately dismissed the SEC's allegations as baseless and vowed to vigorously defend their operations. Both platforms emphasized their commitment to cooperating with the SEC and protecting their users' interests, criticizing the regulator's tactics and enforcement approach.
Similarly, Coinbase remains defiant in the face of the SEC lawsuit. The company's Chief Legal Officer, Paul Grewal, criticized the SEC's enforcement-based approach and called for legislation that applies transparent, equal rules for the industry.
Binance and Coinbase: A Comparative Look at the Lawsuits
While the SEC has targeted both Binance and Coinbase, the allegations against each differ significantly. The charges against Binance are arguably more severe, directly implicating CZ, the company's CEO, and accusing the exchange of manipulating customer funds.
The SEC's case against Coinbase focuses more on its status as an unregistered securities exchange and its offering of allegedly unregistered securities. Despite the significant accusations, the lawsuit against Coinbase does not mention any company officials directly.
The SEC just went after @coinbase
The SEC also approved the Coinbase IPO in 2021
This is contradictory
This is predatory
This is communismstorage.courtlistener.com/recap/gov.usco…
— Wendy O (@CryptoWendyO)
Jun 6, 2023
Federica Pantana, an attorney specializing in securities law compliance, suggests that Binance could face more severe consequences as companies seldom recover from fraud or related claims.
4.
Our team is all standing by, ensuring systems are stable, including withdrawals, and deposits.
We will issue a response once we see the complaint. Haven't seen it yet. Media gets the info before we do.
🙏 twitter.com/i/web/status/1…
— CZ 🔶 Binance (@cz_binance)
Jun 5, 2023
Impact on the Crypto Market
These lawsuits signify an escalating crackdown by the SEC on crypto businesses. They have also prompted a reevaluation of which cryptocurrencies the regulator considers as securities, a classification that now encompasses an estimated 67 tokens.
We feel that the fallout from these legal battles could significantly reshape the cryptocurrency landscape — and the looming question is whether other crypto businesses will fall under the SEC's enforcement hammer.
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What does the term "HODL" mean in the context of cryptocurrency?
A. Hold on for Dear Life
B. High Octane Digital Ledger
C. Hyper-Optimized Data Layer
D. None of the above
Scroll down to the bottom to see if you're right!
⚡ Lightning Round: Weekly Updates
Crypto entrepreneurs and Gemini co-founders, the Winklevoss twins, have warned the Democratic party that its hostility towards cryptocurrency could cost them in future elections. They claimed that cryptocurrencies are popular among young voters, a demographic that seriously helped the Democrats win in 2020. They criticized Senator Elizabeth Warren and SEC Head Gary Gensler's stringent regulatory stance on crypto, and believe this could lead to the alienation of potential Democratic voters. The pair contrast this with a seemingly more open attitude towards crypto from Republicans, indicating potential political repercussions.
The recent Texas legislative session resulted in significant advancements for Bitcoin miners in the state. Proposed bills aimed at preserving an attractive environment for miners were largely successful, and the “anti-mining” Senate Bill 1751 was rejected. According to Lee Bratcher, the Texas Blockchain Council's President, this positions Texas to become the “Silicon Valley of the Digital Asset industry.” Additional bills encouraging the use of flared gas in mining and imposing transparency requirements on crypto exchanges were also passed.
The dispute over the disclosure of FTX customers' identities persists, as Perella Weinberg Partners' Kevin Cofsky argued it could damage the bankrupt crypto exchange's ongoing sales process. Cofsky stated that unveiling this private information could undermine the company's current value — while surely many feel that the company has undermined its own value. Despite FTX's institutional creditors being known, the identities of 9.6 million individuals owed money remain hidden.
❓ Trivia Answer
Answer: A.
Originally from a typo in a forum post from 2013, “HODL” is simply a misspelling of the word “hold” that became popular within the crypto community during an extremely volatile time in Bitcoin’s price history. It now means to buy a cryptocurrency and hold it (without selling) regardless of what the price or market are doing.
Web3 Resource of the Day
Gary & The SEC Will Not Defeat Crypto | Video from Bankless
Today, we’re sending another incredibly timely weekly update video from Bankless, where hosts David Hoffman and Ryan Sean Adams cover what’s happening with the SEC vs. Binance and Coinbase suits, why the companies are being sued, and whether SEC chair Gary Gensler will get away with it. As always, Bankless offers level-headed insights and analysis in the face of a volatile time in crypto’s history.
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DISCLAIMER: This is not financial advice. This newsletter is strictly educational and is not investment advice to buy or sell any assets or to make any financial decisions. Do your own research.