TechDigits

Tech news
Tuesday, Apr 23, 2024

Coinbase insider trading case sparks tug-of-war between SEC and CFTC

Coinbase insider trading case sparks tug-of-war between SEC and CFTC

Caroline Pham of the Commodity Futures Trading Commission appeared to criticise her colleagues at the Securities and Exchange Commission over a case of crypto insider trading as the two battle for regulatory oversight.
Coinbase insider trading case in the middle of a regulatory tug-of-war for control over the prestigious task of regulating crypto assets.

The Securities and Exchange Commission charged on Thursday a former Coinbase product manager and two associates with securities fraud.

The trio had allegedly made off with over $1 million in illicit profits based on sensitive and confidential corporate information. Two of them have been arrested—one while he was attempting to leave the country—and are now held in U.S. law enforcement custody.

There’s just one problem.

Coinbase says the men could not have possibly committed securities fraud, because Coinbase doesn’t even offer clients the ability to trade securities. More to the point, the Justice Department and the Commodity Futures Trading Commission appear to think so as well, the crypto exchange claims.

“The DOJ reviewed the same facts and chose not to file securities fraud charges against those involved. As CFTC Commissioner Caroline Pham stated, this is a ‘striking example of regulation by enforcement’ by the SEC,” wrote the company’s chief legal officer, Paul Grewal in a post published on Friday entitled “Coinbase does not list securities. End of Story”.

The case, SEC vs Wahi, is shaping up into a regulatory tug-of-war pitting the CFTC against the SEC, and reopens the debate over which regulatory bucket a digital coin or token falls into and which U.S. agency will win the high-profile task of providing oversight.

Read my statement on #SEC v. Wahi, regulation by enforcement & #CFTC authority #crypto #digitalassets #DAO pic.twitter.com/xbHvyshx8l

— Caroline D. Pham (@CarolineDPham) July 21, 2022

“Instead of crafting tailored rules in an inclusive and transparent way, the SEC is relying on these types of one-off enforcement actions to try to bring all digital assets into its jurisdiction, even those assets that are not securities,” argued Grewal.

Meanwhile, Commissioner Pham of the CFTC seemed to criticize the SEC in a statement posted on social media.

"The SEC’s allegations could have broad implications beyond this single case, underscoring how critical and urgent it is that regulators work together," she wrote.
Not concerned with labels

Currently, Coinbase believes the SEC, an agency with a long reach, is staking its claim to that prize. Without a clear set of guidelines that provide a level playing field and legal certainty, this piecemeal approach of one-off enforcement actions by the SEC could potentially stifle the innovation in the crypto industry, it fears.

Coinbase's chief policy officer, Faryar Shirzad, wrote in a separate post that the SEC's intervention has created “enormous risk” for investors, citing the case of Ripple’s native token XRP suddenly being deemed by the SEC a security.

“We saw this in vivid detail when the Commission brought an enforcement action against Ripple, after years of taking no action against them,” Shirzad wrote. “The XRP case is especially notable because there was disagreement even within the federal government about whether XRP was a security or not: FinCEN [Financial Crimes Enforcement Network] had determined it was not a security, and then the SEC said that it was.”

The regulatory treatment of crypto is a controversial one. Michael Saylor, CEO of MicroStrategy the largest publicly-known holder of Bitcoin, recently argued that only Bitcoin fits the description of a commodity as it lacks an issuer, product development, employees, or a management team.

All other cryptocurrencies are by comparison little more than “unregulated securities” in his book. That’s because they fit the broad description: There is typically a team behind them attempting to add functionality to their coins and tokens, as well as encouraging a decentralized system of third-party applications to build on top of their blockchains' base layer of code.

Grewal counters by saying Coinbase does an extensive review of each asset it lists. In the process the company weeds out whatever could potentially be deemed a security that would fall under the SEC’s purview. As a result, his company has been actively cooperating with the DOJ, which is pursuing the case not as securities fraud but as wire fraud.

“The SEC’s charges put a spotlight on an important problem: the U.S. doesn’t have a clear or workable regulatory framework for digital asset securities," Grewal wrote.

It also raises the issue over whether U.S. financial markets may eventually find themselves at a disadvantage to other jurisdictions, notably the European Union, that have already implemented a legal framework to give issuers certainty.

The SEC's director for the Division of Enforcement, Gurbir Grewal (not related to Paul Grewal) was unmoved by the debate.

“We’re not concerned with labels, but rather the economic realities of an offering,” he said in a statement. “Rest assured, we’ll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved.”
Newsletter

Related Articles

TechDigits
0:00
0:00
Close
FTX's Bankman-Fried headed for jail after judge revokes bail
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Musk announces Twitter name and logo change to X.com
The future of sports
TikTok Takes On Spotify And Apple, Launches Own Music Service
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Poor Man With Money, Mark Zuckerberg, Unveils Twitter Replica with Heavy-Handed Censorship: A New Low in Innovation?
The Double-Edged Sword of AI: AI is linked to layoffs in industry that created it
US Sanctions on China's Chip Industry Backfire, Prompting Self-Inflicted Blowback
Meta Copy Twitter with New App, Threads
BlackRock Bitcoin ETF Application Refiled, Naming Coinbase as ‘Surveillance-Sharing’ Partner
UK Crypto and Stablecoin Regulations Become Law as Royal Assent is Granted
A Delaware city wants to let businesses vote in its elections
Alef Aeronautics Achieves Historic Milestone with Flight Certification for World's First Flying Car
Google Blocked Access to Canadian News in Response to New Legislation
French Politicians Advocate for Pan-European Regulation on Social Media Influencers
Melinda French Gates Advocates for Increased Female Representation in AI to Prevent Bias
Snapchat+ gains 4 million paying subscribers in its first year
Apple Makes History as the First Public Company Valued at $3 Trillion
Elon Musk Implements Twitter Limits to Tackle Data Scraping, but Faces Criticism for Technical Misunderstanding
EU and UK's Slow Electric Vehicle Adoption Raises Questions About the Transition to Green Mobility
Top Companies Express Concerns Over Europe's Proposed AI Law, Citing Competitiveness and Investment Risks
Meta Unveils Insights on AI Usage in Facebook and Instagram, Amid Growing Calls for Transparency
Crypto Scams Against Seniors Soar by 78% in 2022, Experts Urge Vigilance
The End of an Era: National Geographic Dismisses Last of Its Staff Writers
Shield Your Wallet: The Perils of Wireless Credit Card Theft
Harvard Scientist Who Studies Honesty Accused Of Data Fraud, Put On Leave
Putting an End to the Subscription Snare: The Battle Against Unwitting Commitments
The Legal Perils of AI: Lawyer Faces Sanctions for Relying on Fictional Cases Generated by Chatbot
ChatGPT’s "Grandma Exploit": Ingenious Hack Exposes Loophole in AI, Generates Free Software Codes
The Disney Downturn: A Near Billion-Dollar Box Office Blow for the House of Mouse
A Digital Showdown: Canada Challenges Tech Giants with The Online News Act, Meta Strikes Back
Distress in the Depths: Submersible and Passengers Missing in Titanic Wreckage Expedition
Mark Zuckerberg stealing another idea: Twitter
European Union's AI Regulations Risk Self-Sabotage, Cautions smart and brave Venture Capitalist Joe Lonsdale
Nvidia GPUs are so hard to get that rich venture capitalists are buying them for the startups they invest in
Chinese car exports surge
Reddit Blackout: Thousands of Communities Protest "Ludicrous" Pricing Changes
Nvidia Joins Tech Giants as First Chipmaker to Reach $1 Trillion Valuation
AI ‘extinction’ should be same priority as nuclear war – experts
×