Crypto: Coinbase in the crosshairs of US stock cop
To keep up with the competition, Coinbase has continued to add new cryptocurrencies to its platform. But the SEC suspects that the platform is offering its users securities that should be registered in its eyes.
The noose is tightening around Coinbase. While the US company bears the brunt of the cryptocurrency crisis, it now faces an investigation by the US stockbroker, the SEC (Securities and Exchange Commission) has revealed. Bloomberg.
Eager not to be left behind by the competition, Coinbase has continued to add new cryptocurrencies to its platform. However, for the US regulator, some of these tokens fall under the law of securities. In other words, the SEC suspects Coinbase of offering its users securities that should be registered in its eyes.
If that were the case, it would mean that the US platform would have to apply for a change of status with the SEC in order to be authorized to offer its users access to the titles in question. In this context, the regulator will therefore conduct in-depth investigations into Coinbase’s asset listing practices, to determine whether or not they are fraudulent. The San Francisco-based company already has a clear opinion on the matter. On July 22, 2022, Paul Grewal, Coinbase’s chief legal officer, posted on the company’s blog with a suggestive headline: “Coinbase does not list securities, end of story”.
Former Coinbase CEO charged with insider trading
The aggressive tone of the platform testifies to the nervousness that currently reigns in its workforce. And for good reason, a few days ago the SEC charged the former CEO of Coinbase, as well as his brother and friend, with insider trading. The latter are accused of making illegal transactions on at least 25 crypto-assets for a profit of $1.5 million based on confidential information. At the center of this scheme to collect this jackpot we find Ishan Wahi, a former product manager at Coinbase, in the team in charge of listing cryptocurrencies on the platform.
Due to his privileged position, the latter had access to sensitive information in advance, such as the calendar for the registration of new crypto assets on Coinbase. According to the SEC, Ishan Wahi used his status with the company to inform his brother Nikhil Wahi and friend Sameer Ramani between June 2021 and April 2022 of upcoming cryptocurrency listings on the platform, so they could transact in the relevant virtual assets before be publicly presented on Coinbase.
After the new cryptocurrencies were listed on the platform, their price increased, making the trio significantly richer. Despite taking precautions to avoid detection, particularly using anonymous ethereum wallets, the Twitter account issued a warning last April, prompting US authorities to seize the file. Ishan and Nikhil Wahi have been arrested, while Sameer Ramani is still at large.
18% of the workforce reduced
The case is therefore testing the nerves of Coinbase’s leaders as the platform goes through a difficult period. Shaken by the fall in cryptocurrencies, the company is no longer even among the top 10 cryptocurrency exchanges, according to a report by investment bank Mizuho Securities citing Bloomberg.
Worse, Coinbase is no longer the world’s leading bitcoin exchange, now dethroned by Binance, according to Glassnode data. In this delicate context, Coinbase decided in mid-June to lay off 18% of its workforce, or about 1,100 jobs, while its valuation was split almost sevenfold in one year.