A recent report revealed claims from the United States Securities and Exchange Commission stating that its approval of Coinbase exchange’s publicity in 2021 was not a charity and didn’t mean the exchange could not violate set rules and regulations.
According to the report, the SEC recently claimed during a pre-motion court hearing in its lawsuit against the American-based Coinbase exchange that because it grants S-1 filling from Coinbase, which allows it to go public, does not make the exchange immune to trespassing the financial laws with its operations.
In addition, the regulator’s file during the hearing claimed that its approval of the S-1 filing is not a blessing of any kind from the authority, nor does it suggest any form of validation that the firm has the utmost compliance with regulations. It added that it did not sign off on the exchange’s business structure when it permitted it to go public in April 2021.
Peter Mancuso, the trial counsel for the SEC, claimed during the hearing that there is no way that when a firm receives S-1 filing approval from the authority, it automatically means that the underlying business structure of the firm cannot violate the laws stated by the regulators such as the case of Coinbase.
In addition, he claimed that there is no proof that when the SEC was granting Coinbase’s S-1 filing, it examined or classified the assets the exchange listed and did not give the exchange any hint that could have translated to assurance that the assets could not be later defined as securities.
Crypto Enthusiasts Questioned The SEC’s Defense Statement
The SEC claims stirred a lot of reactions in the crypto community as many crypto enthusiasts revealed their opinions on crypto Twitter. One of the significant commentators was Cameron Winklevoss, a Gemini co-founder, who pointed out the consequences of the statements uttered by the SEC legal representative.
In his comment, Cameron stated that the SEC allowed Coinbase to issue an initial public offering (IPO) to American citizens to invest in just to seek to hunt it down now. He questioned the integrity of the regulator as it allowed a non-compliant firm to go public, neglecting its responsibility of protecting the rights and properties of the United States of America consumers.
According to the report, the constitution of the US warrants firms to apply for S-1 filing from the American SEC to begin listing shares on stock exchanges in the country. Also, in the filing, firms are required to state a comprehensive breakdown of their business operations and how they would utilize the profits from an IPO.
Furthermore, Katherine Polk Failia, the US District Judge presiding over the case, queried attorney Mancuso following his statement in the lawsuit. She pointed out that she does not expect the SEC to be omniscient or know everything when conducting the registration process.
Judge Favors Coinbase’s Argument
But she expected the commission to have paid attention to Coinbase’s operation while it applied for S-1 filing in 2021 and forewarned it of any business involvement that might violate the securities rules or attract future legal complications.
However, SEC’s legal counsel reportedly claimed that the commission was somewhat more focused on issuing firm disclosures than examining the business structure and signing them off at the time.
But, Judge Failia maintained her stance as she queried Mancuso if the SEC had the jurisdiction, or not, to directly tell Coinbase to register as a securities exchange back then. The plaintiff, however, avoided the question as he said he was not in the right position to answer the question, according to the report.
Currently, Coinbase exchange is striving for the lawsuit to be dismissed as soon as possible, claiming in court that despite its diligence to elaborately explain its business proposal to the SEC in 2021 before issuing its IPO with any complications, the regulator is bent on charging it with regulation violation now.