The SEC and Coinbase Clash Over Celsius’ Use of the Exchange as a Distribution Agent
The U.S. Securities and Exchange Commission (SEC) and crypto exchange Coinbase are in disagreement over the role that collapsed crypto lender Celsius wants Coinbase to play as a distribution agent. The SEC stated in a filing on Friday that Celsius’ plan to use Coinbase as a distribution agent for international customers exceeds the services of a distribution agent and includes brokerage services and master trading services.
Celsius, which went bankrupt last year, is now working to return funds to its former customers under new management and seeks assistance from Coinbase. However, the SEC argues that Coinbase’s involvement may implicate concerns raised in its District Court action against the exchange, alleging that Coinbase acted as an unregistered exchange, clearing house, broker, and sold unregistered securities.
Coinbase’s Response to the SEC
Coinbase Chief Legal Officer Paul Grewal questioned the SEC’s objection on Twitter, asking why the regulator would object to a trusted U.S. public company taking on this role. He stated that Coinbase is proud to engage with Celsius in distributing crypto back to its customers and looks forward to addressing this issue with the bankruptcy court.
Coinbase is proud to engage with Celsius to distribute crypto back to its customers. I wonder, why would the SEC object to a trusted US public company taking on this role? We look forward to addressing this with the bankruptcy court and undertaking our important role to make…
— paulgrewal.eth (@iampaulgrewal) September 25, 2023
The SEC, along with the Department of Justice (DOJ), Federal Trade Commission (FTC), and Commodity Futures Trading Commission (CTFC), filed a lawsuit against Celsius in July. The regulators alleged that Celsius deceived customers about the safety of its platform and sold unregistered securities. Celsius had promised investors high returns and claimed to be the safest place for crypto, but it halted user withdrawals in June 2023 due to extreme market conditions.
The DOJ has since charged Celsius’ former CEO, Alex Mashinsky, with seven criminal charges and frozen his assets.
Hot Take: SEC’s Concerns Surrounding Coinbase’s Role in Celsius’ Distribution Agent Plan
The clash between the SEC and Coinbase over Celsius’ use of Coinbase as a distribution agent highlights the ongoing regulatory scrutiny faced by cryptocurrency companies. The SEC’s objection stems from concerns that Coinbase’s involvement may extend beyond the services of a distribution agent, potentially implicating issues raised in the SEC’s previous lawsuit against Coinbase. This clash raises questions about the regulatory boundaries surrounding cryptocurrency exchanges and their roles in facilitating transactions. As the case unfolds in bankruptcy court, it will provide further insights into how regulators view and interpret the responsibilities of crypto exchanges within the broader ecosystem.
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