Tag: coinbase

Coinbase Sued in US for Allegedly ‘Deceiving’ Investors: Details

Just a week after Coinbase reported a spike in its first quarter revenue, the exchange has found itself embroiled in a lawsuit. A group of six users of the exchange have alleged in a lawsuit that Coinbase, under its CEO Brian Armstrong, are violating state securities laws and deceiving users by claiming that the exchange does not sell crypto tokens as securities. In the US, securities are assets that are invested in with the expectation to churn a gain through the efforts of some other entity but the investors.

The lawsuit against Coinbase has been filed in the United States District Court for the Northern District of California San Francisco Division. The document has claimed that Solana, Polygon, Near Protocol, Decentraland, Algorand, Uniswap, Tezos, and Stellar are listed on the exchange as Securities.

“Coinbase has been a part of a shadowy crypto ecosystem operating just outside of the law since formed over 10 years ago. Its entire business model has been built upon a lie and a dream: the lie is that “we do not sell securities,” and the dream is that, knowing it would eventually be caught in the lie, ‘it is better to ask for forgiveness than permission’,” the plaintiffs have said in their lawsuit.

In drafting its user agreement with the investors and other customers, the lawsuit claims, Coinbase specifically identifies the crypto assets it sells as ‘securities’ despite which it has never registered itself, its people, or the crypto securities it sells. The document also highlights that Coinbase, in its user agreement admits that it is a ‘Securities Broker’.

On the basis of these allegations levied against Coinbase, the plaintiffs are seeking an injunctive relief through a jury trial alongside a full rescission, CoinTelegraph said in its report. As per CoinTelegraph, the exchange has said that the sales of secondary crypto assets do not meet securities transactions criteria. The exchange, meanwhile, has not released an official statement commenting on this lawsuit.

This is not the first time, that Coinbase has been dragged under the legal scanner for allegedly violating US’ securities laws through unlawful business operations. In January this year, a federal judge in Manhattan grilled Coinbase and the US securities regulator about their divergent views on whether and when digital assets are securities. The SEC had filed a lawsuit against Coinbase last year, commenting on which the exchange had urged the US court to dismiss SEC’s lawsuit.

Despite regular run-ins with the authorities, Coinbase managed to churn profits in Q1 2024. The exchange has claimed to have clocked $1.6 billion (roughly Rs. 13,365 crore) in total revenue and $1.2 billion (roughly Rs. 10,023 crore) in net income for 2024 Q1. The exchange additionally reported $1 billion (roughly Rs. 7,500 crore) in adjusted earnings before interest, taxes, depreciation and amortisation.

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Coinbase Plans to Launch Futures Trading for Dogecoin, Lauds Memecoin’s Transition Over Years

Coinbase is seemingly exploring ways to add more services to its portfolio that makes people reach its platform and engage with digital assets in varied manners. The crypto exchange is now planning to launch a futures trading service for Dogecoin. Through futures trading, people can hedge against the future values of an asset under smart contracts which ensure, that on the pre-decided date the buying and selling of the assets are completed at the price that was speculated at the beginning.

Moving forward with this plan, Coinbase has outlined its plans to the US Commodity Futures Trading Commission (CFTC) through written letters. In the letter, the exchange explains how it plans to launch futures contract products with a cash-settle feature. Explaining an interest in DOGE, Coinbase told the CFTC, “Dogecoin’s enduring popularity and the active community support suggest that it has transcended its origins as a meme to become a staple of the cryptocurrency world.”

At the time of writing, Dogecoin was trading at $0.15 (roughly Rs. 12.3) as per Gadgets360’s crypto price tracker. Screenshots of Coinbase’s filing with the CFTC have surfaced on social media.

Coinbase is gearing to launch the Dogecoin futures trading service by April 1. The exchange could launch this service on the Coinbase Derivatives platform before even receiving the approval from CFTC, by invoking the ‘self-certification’ method, a report by CoinTelegraph explained. On the sidelines of this development, Dogecoin has risen in value by 19.90 percent in the last 24 hours, showed CoinMarketCap.

Since its inception in 2013, Dogecoin has shown a notable growth in the crypto sector. Dogecoin was created as a joke by Billy Markus and Jackson Palmer with its logo modelled after Elon Musk’s pet dog that belongs to the Japanese breed of Shiba Inu. Between 2013 and the present day, Dogecoin has swelled to the market cap of $21.4 billion (roughly Rs. 1,78,065 crore) — sitting on the ninth rank in terms of market cap size on CoinMarketCap.

Dogecoin, however, is not the only cryptocurrency that Coinbase is looking to include in its futures trading list. Litecoin and Bitcoin Cash could also soon make it to this list. Litecoin and Bitcoin Cash are trading at $83.01 (roughly Rs. 6,900) and $399.82 (roughly Rs. 33,236), respectively.

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Crypto Firm, Industry Group Sue US SEC for ‘Overreach’ on Digital Assets

A Texas cryptocurrency company and an industry group sued the U.S. Securities and Exchange Commission on Wednesday, saying the regulator has overstepped its authority and asking a judge to rule that digital assets traded on exchanges are not securities.

Fort Worth-based crypto company Lejilex and lobbying group Crypto Freedom Alliance of Texas (CFAT) claim the SEC has asserted jurisdiction over the industry without a “clear statutory mandate.”

Lejilex says it seeks to run a cryptocurrency platform called Legit.Exchange. The company formed last year said it plans to list digital assets including those the SEC has deemed securities in lawsuits against Coinbase, the largest cryptocurrency exchange in the U.S., and Binance, the world’s largest crypto exchange.

Lejilex wants the court to rule that listing pre-existing tokens will not violate securities laws.

“We wish we were launching our business instead of filing a lawsuit, but here we are,” Lejilex co-founder Mike Wawszczak said in a statement.

A spokesperson for the SEC did not immediately reply to a request for comment.

Both Coinbase and Binance have denied the SEC’s allegations.

CFAT asked the court to block the SEC from suing its members, and said the agency’s assertion of jurisdiction over digital assets has made it harder to convince Texas lawmakers to embrace “sensible policies.”

The group launched last year and counts Coinbase and venture capital firm Andreessen Horowitz’s a16z crypto fund as members.

CFAT and Lejilex argue the SEC is wrong to classify digital assets as “investment contracts” because they create no ongoing commitment between creator and purchaser.

They also asked the court to apply the “major questions” doctrine, which lets judges invalidate executive agency actions of “vast economic and political significance” unless Congress clearly authorized them.

The once-rare doctrine has gained traction among regulatory opponents, as the conservative-leaning U.S. Supreme Court has applied it in a couple of recent cases.

Crypto companies fighting SEC enforcement actions, including Coinbase and Binance, have made the same arguments in the other cases, so far without success.

A judge in July rejected the argument that an ongoing commitment is required to make an asset a security in the SEC’s case against Ripple Labs. Another judge overseeing the regulator’s lawsuit against Terraform Labs found the “major questions” doctrine does not apply to the cryptocurrency industry. Both of those cases were brought in New York.

The new lawsuit filed in federal court in Fort Worth brings the industry’s fight with the regulator under the jurisdiction of the 5th U.S. Circuit Court of Appeals. More than two thirds of the judges on the appeals court were appointed by Republican presidents, making it the favored venue for challenges to the SEC under the Biden administration.

The case was assigned to Judge Reed O’Connor, an appointee of Republican former President George W. Bush with a track record of ruling in favor of conservative litigants challenging laws and regulations governing guns, LGBTQ rights and healthcare.

Paul Clement, former U.S. Solicitor General under President George W. Bush, represents the plaintiffs.

© Thomson Reuters 2024

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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Coinbase Crypto Exchange, US SEC Lock Horns in US Court Over Digital Assets as Securities

A federal judge in Manhattan on Wednesday grilled Coinbase and the US securities regulator about their divergent views on whether and when digital assets are securities, in a case closely watched by the cryptocurrency industry.

Coinbase has asked the court to dismiss the Securities and Exchange Commission’s lawsuit alleging the largest US crypto exchange is flouting its rules.

Judge Katherine Polk Failla on Wednesday heard arguments from both sides, focusing her questions on the legal precedent defining securities, and the attributes of several crypto tokens traded on Coinbase and elsewhere that the regulator has deemed investment contracts.

Failla did not decide the matter from the bench, noting she was still weighing some questions after the more than four-hour hearing.

The judge’s ruling is likely to have implications for digital assets by helping to clarify the SEC’s jurisdiction over the sector.

The case is one of a slew the SEC has brought against the crypto sector. The agency focused initially on companies selling digital tokens, but under the leadership of chair Gary Gensler has targeted firms offering trading platforms and clearing activity, and acting as broker-dealers.

The SEC sued Coinbase in June, saying the firm facilitated trading of at least 13 crypto tokens, including Solana, Cardano and Polygon, which it said should have been registered as securities.

The Securities Act of 1933 outlined a definition of the term “security,” yet many experts rely on a US Supreme Court case to determine if an investment product constitutes a security. A key test is whether people are contracting to invest in a common enterprise with the expectation of profit.

Coinbase, the world’s largest publicly traded cryptocurrency exchange, has argued that crypto assets, unlike stocks and bonds, do not meet that definition of an investment contract, a position held by the vast majority of the crypto industry.

Lawyers for the SEC argued that securities differ from purchases of collectibles like baseball cards or even Beanie Babies, referencing a 1990s trend in which Americans bought the dolls with the expectations they would rise in value.

Patrick Costello, SEC assistant chief litigation counsel, argued that the crypto tokens at the heart of the case support a larger “enterprise,” making them akin to an investment contract.

“When the value of the network or the ecosystem increases, so does the value of the (associated) token,” he said.

Still, Failla told SEC attorneys she was “concerned” that the agency was asking her to “broaden the definition of what constitutes a security.”

The SEC said buyers of digital assets, even on secondary markets such as Coinbase’s platform, were purchasing the tokens as investments akin to stock shares or bonds.

But Coinbase’s lawyers disagreed, noting that buyers of such tokens were not signing contracts entitling them to proceeds of a common enterprise.

“I’ll tell you this: I think there would have been a lot of surprise to find that an investment contract didn’t have anything to do with a contract,” said William Savitt, a lawyer for Coinbase.

The judge appeared dismissive of Coinbase’s argument that the lawsuit implicates the so-called major questions doctrine. That legal principle is based on a Supreme Court ruling that says federal agencies cannot regulate without specific congressional authorization.

The SEC in its lawsuit also targeted Coinbase’s “staking” program, in which it pools assets to verify activity on blockchain networks and takes commissions, in exchange for “rewards” to customers. The SEC said that program should have been registered with the agency.

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US SEC Denies Coinbase Petition Seeking New Crypto Rules for Digital Assets Sector

The US Securities and Exchange Commission on Friday denied a petition by Coinbase Global seeking new rules from the agency for the digital asset sector, which the country’s largest crypto exchange said it plans to challenge in court.

The five-member commission, in a 3-2 vote, said it would not propose new rules because it fundamentally disagreed that current regulations are “unworkable” for the crypto sphere, as Coinbase has argued. The firm later notified an appeals court that it plans to seek judicial review of the SEC’s decision.

The dispute was the latest in a broader tug-of-war between the crypto sector and the top U.S. markets regulator, which has repeatedly said most crypto tokens are securities and subject to its jurisdiction. The agency has sued several crypto companies, including Coinbase, for listing and trading crypto tokens which it says should be registered as securities.

“Existing laws and regulations apply to the crypto securities markets,” SEC Chair Gary Gensler said in a separate statement supporting the decision.

Coinbase disputed that assertion.

“No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do,” chief legal officer Paul Grewal said in a statement. “We should be working together to create laws and rules that will benefit consumers and US innovation”.

Shortly thereafter, Coinbase notified a federal court of appeals in Philadelphia of its plans to seek review of the SEC’s denial.

In 2022, the company pressed the SEC to create a bespoke set of rules for the crypto sector, arguing that existing U.S. securities laws are inadequate. In April, Coinbase appealed to a judge to force the SEC to respond to the petition.

The court said it would not force the agency to act, given the SEC had said it would respond to Coinbase’s petition.

Crypto firms have said they want a clearer idea of when the SEC views a digital asset to be a security.

In his statement on Friday, Gensler argued that in asking the SEC to write rules, Coinbase had acknowledged the SEC’s authority over the crypto sector, something the crypto exchange has refuted in the past.

Republican SEC Commissioners Hester Peirce and Mark Uyeda said in a joint statement that they disagreed with the decision.

“In our view, the Petition raises issues presented by new technologies and other innovations, and addressing these important issues is a core part of being a responsible regulator,” they said.

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Crypto Firms in US Spent Nearly $19 Million on Lobbying in First 3 Quarters of 2023, on Track for Record Year

The cryptocurrency industry was on track to hit a new record for federal lobbying spending, after a year in which firms scrambled to repair their reputations and advance friendly legislation, according to data provided to Reuters by nonprofit research group OpenSecrets.

Crypto companies spent $18.96 million (roughly Rs. 158 crore) in the first three quarters of 2023 on lobbying, compared with $16.1 million (roughly Rs. 134 crore) during the same period in 2022. That was despite last year’s spectacular meltdown of crypto exchange FTX, which had been a top-ten spender. Last year, companies including FTX spent nearly $22 million (roughly Rs. 183 crore) on lobbying in total.

Coinbase, the largest US crypto exchange, led the pack again, spending $2.16 million (roughly Rs. 18 crore), followed by Foris DAX, which operates Crypto.com, the Blockchain Association and Binance Holdings.

“Our goal is to engage directly with policymakers, build relationships and bridge the education gap to build a commonsense regulatory framework,” said Kristin Smith, CEO of the Blockchain Association, in a statement.

Crypto companies have been expanding in Washington, in part to try to mend their reputations following a string of scandals last year, including the collapse of FTX, whose former CEO Sam Bankman-Fried had been a familiar presence in Washington. He was found guilty of fraud last month by a jury in a Manhattan federal court.

Crypto firms have also been trying to combat growing regulatory scrutiny, especially from the US Securities and Exchange Commission which says the industry has been flouting its rules. Lobbying escalated after the SEC sued Coinbase and Binance in June for allegedly failing to register tokens, claims they deny.

The industry has also been pushing the SEC to approve a spot bitcoin exchange-traded fund (ETF), which would open up the world’s largest cryptocurrency to millions more investors. Optimism that the agency will green-light the product after losing to a key court on the matter in the summer helped drive bitcoin to a 20-month high on Monday.

Crypto companies have also been trying to advance friendly legislation in the House of Representatives and scored a victory in July when a congressional committee in that chamber passed two major bills that lobbyists say would help provide clarity over which existing financial rules apply to crypto companies.

Although those bills have yet to advance further, crypto lobbyists are not letting up. Coinbase, which in September launched a grassroots advocacy campaign, is continuing its push with more lawmaker meetings in coming weeks, a spokesperson said.

Binance and Crypto.com did not respond to requests for comment.

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Coinbase Plans to Push Institutional Investors into Web3, Defi, NFTs Amid Rattled India Operations

Coinbase, in a bid to get institutional investors to engage with NFTs and DeFi, has launched a new service dedicated to do so. Under its Coinbase Prime division, the exchange has launched an institutional grade Web3 Wallet with advanced level security and utility provisions. Coinbase’s interest to increase the involvement of hefty investors into the digital assets sector comes at a time when the global Web3 market is projected to churn $3.25 billion (roughly Rs.26,955 crore) by the end of 2023.

The Coinbase Prime Web3 Wallet will allow clients to store tokens and gain instant access to funds under self-custody. It will also help users interact with decentralised applications (dApps) as well as smart contracts.

“Institutional clients have been looking for reliable access but have struggled to find it in the current environment. Many of our own institutional clients have had to use a patchwork of fragmented solutions to access web3 up until now. With our Web3 Wallet, clients can easily access Web3,” the exchange said in an official post.

Coinbase Prime Takes Centre Stage

In May 2021, Coinbase launched its Prime service to cater to the advanced trading and asset custody needs of institutional investors.

This new Web3 wallet will get users the access to any dApp as well as tokens from supported networks.

“Because our Web3 Wallet is built into Coinbase Prime, it leverages the same flexible team member permissioning for enhanced security. This gives clients the ability to determine the appropriate level of access for each team member by assigning them a user role with a limited set of customisable permissions. Prime Web3 Wallet also utilises the same entity and portfolio hierarchy providing further customisation based on how an institution is organised,” the exchange’s post added.

To help companies stay ahead of security threats, the wallet will provide approval alerts, transaction previews, risk warnings, as well as an option to block suspicious dApps. The exchange has claimed that its implementation of the ‘multi-party computation (MPC)’ system can never expose the users’ private keys. It also plans to provide its clients with a special self-custody backup which could come-in handy for the secure recovery of their keys.

This development comes at a time when Coinbase’s operations in India — which topped Chainalysis’ Global Crypto Adoption Index 2023 — are rattled up.

After some of its users in India got notifications of their accounts being disabled in the coming days, rumours arose that Coinbase could be discontinuing its operations in the country all together. While the company said it remains committed to its Indian users, Coinbase has temporarily paused new registrations from India for the time being.

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Coinbase Discontinues Services for ‘Policy Violators’ in India; Reportedly Shuts New Registrations

Coinbase on Monday clarified that it was not shutting operations in India, hours after reports surfaced that it had emailed customers asking them to withdraw their funds before September 25. The exchange reportedly stated that it is not ceasing its India operations for all users. The confusion over the company’s services in India comes just days after crypto-related suggestions and concerns were voiced by world leaders during the G20 Summit as well as the Global Fintech Fest 2023, both of which were held in the country last week.

Media reports earlier on Monday claimed Coinbase was going to discontinue its services in India citing an email that some of Coinbase’s India users received over the weekend. This email directed its receivers to withdraw any funds that were stored with the exchange.

The exchange has only sent this email to those of its users who have been identified to be in violation of its policies, sources familiar with the matter confirmed to Gadgets 360. More updates on the same remain awaited from the company’s end.

Meanwhile, a TechCrunch report states that the company has also stopped new registrations from users in India. “It is possible that during the course of a recent routine review of our systems, some accounts may have been identified that no longer meet our updated standards. We will therefore be disabling these accounts and allow customers to update their information at a later date,” a company spokesperson told the publication.

Users of crypto exchanges in India need to provide KYC-related information as per company guidelines to access services on the direction of most government regulations.

Coinbase launched its services in India in April last year. In August 2022, when Coinbase announced that it was going to let Indian users purchase crypto on its app via UPI payments, the National Payments Corporations of India (NPCI) said it did not authorise Coinbase to provide this feature.

The exchange halted the release of this feature after the NPCI’s clarification, and was never rolled out to users in the country.

Due to a lack of clarity caused by the absence of crypto regulations, the government and the RBI have not been supportive of promoting crypto-related activities in the country, which was also criticised by Coinbase chief Brian Armstrong at the time.

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Coinbase Chief Brian Armstrong to Meet US Lawmakers to Discuss Crypto Future

Brian Armstrong, the CEO of Coinbase crypto exchange, is looking to meet with policymakers from the US. The agenda of Armstrong’s rendezvous with the Democrats revolves around opening discussions on the future of the digital assets sector in the US. Valued at $1.2 trillion (roughly Rs. 98,47,344 crore) as of Tuesday, July 18, the crypto sector is largely unregulated around the world and is infamous for its volatile nature that poses financial risks to its investor community.

Armstrong, is his meeting, is expected to address topics like crypto taxes, concerns around privacy and data collection, as well as the current industrial climate around crypto in the US, an Aljazeera report said, citing an anonymous New Democrat Coalition spokesperson. The date of this meeting remains undisclosed.

The development comes after Coinbase has been in a scuffle with the US Securities and Exchange Commission (SEC) since earlier this year. The SEC has alleged that the exchange along with its competitor Binance, had failed to disclose and register their complete operational portfolio with the federal agency.

On the other hand, crypto exchanges have argued that crypto tokens are not securities and hence should not fall under the oversight of the SEC.

Since the US does not have a concrete rulebook to govern the crypto sector, the Web3 industry players as well as community members are often running into legal and financial troubles, that hinders the growth of the overall sector.

Last month, Republican representative Patrick McHenry, chairman of the House Financial Services Committee had said that in the coming weeks, he intended to hold a committee vote on a comprehensive bill concerned with governing the cryptocurrency sector.

Meanwhile, the crypto sector has received scepticism in the US Senate by senior members including Senators Sherrod Brown and Elizabeth Warren.

As of February 2023, a report by Coinbase estimated that 20 percent of US residents, that make for around 50 million people, owned cryptocurrencies. For most Americans, the interest towards cryptocurrencies is on the rise because they feel that the global financial system unfairly favours the interests of the powerful.

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Coinbase’s Self-Custody Wallet Service Gets Messaging Feature: All Details

Coinbase, amid it’s on and off legal tussle with the SEC, has deployed an update to its self-custodial wallet service. Users of this wallet service will now have access to a messaging service as well. This will be an end-to-end encrypted service that will let users engage with other members of the community. Essentially, wallet holders will be allowed to send messages to and from Ethereum accounts. This update also shows other wallet players that capabilities of the wallets can be expanded.

As part of this update, Coinbase has also added the XMTP open protocol to its wallet service.

With this, the exchange aims to let users communicate with each other, in case crypto assets are transferred to a wrong wallet address. The messaging service would also let the Coinbase wallet users identify if somebody is impersonating or faking somebody else.

“Gone are the days when you had to send a small balance to confirm a wallet address. No more guessing if a person’s social profile matches their wallet. Eliminate unnecessary risk and potential losses with the help of messaging,” Coinbase wrote in an official blog post announcing the development.

Users will also be able to contact people using other apps compatible with the XMTP protocol.

For the first phase of its rollout, Coinbase is deploying this wallet messaging service for a small subset of the users.

“We’ve helped millions of people claim their free web3 username powered by the Ethereum Name Service (ENS), that makes it easier for others to locate, remember, and send funds to your wallet through your username instead of a lengthy wallet address. Messaging builds upon these existing offerings and allows people to connect in a permissionless way with all the benefits of self-custody,” the blog added.

Coinbase had first released this wallet service five years ago.

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