Crypto: Coinbase in the crosshairs of the American stock market policeman

In order not to be left behind by the competition, Coinbase has continued to add new cryptocurrencies to its platform. But the SEC suspects the platform of offering its users securities that should be registered in its eyes.

The noose is tightening around Coinbase. While the American company is bearing the brunt of the cryptocurrency crisis, it must now face an investigation by the American stock market policeman, the SEC (Securities and Exchange Commission), reveals Bloomberg.

Anxious not to be left behind by the competition, Coinbase has continued to add new cryptocurrencies to its platform. However, for the American regulator, some of these tokens fall under the legislation on securities. In other words, the SEC suspects Coinbase of offering its users securities that should be registered in its eyes.

If this were the case, this would mean that the American platform would have to request a change of status with the SEC to be authorized to offer its users access to the titles in question. In this context, the regulator will therefore carry out in-depth investigations into Coinbase’s asset listing practices, in order 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, Chief Legal Officer of Coinbase, published an evocatively titled op-ed on the company’s blog: “Coinbase does not list securities, end of story”.

Former Coinbase executive charged with insider trading

The aggressive tone of the platform testifies to the nervousness that currently reigns within its workforce. And for good reason, a few days ago, the SEC indicted a former Coinbase executive, as well as his brother and a friend, for insider trading. The latter are accused of having carried out illegal transactions on at least 25 crypto-assets, for a gain of 1.5 million dollars, on the basis of confidential information. At the heart of this scheme to amass this jackpot, we find Ishan Wahi, former product manager at Coinbase, in the team in charge of listing cryptocurrencies on the platform.

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Due to his privileged position, the latter had access in advance to sensitive information, 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 a friend, Sameer Ramani, between June 2021 and April 2022 of upcoming cryptocurrency listings on the platform, so that they can transact in the relevant virtual assets before they are publicly introduced on Coinbase.

Once the new cryptocurrencies were listed on the platform, their price soared, thus significantly enriching the trio. Despite the precautions taken not to be unmasked, in particular by using anonymous ethereum wallets, a Twitter account gave the alert last April, prompting the American authorities to seize the file. Ishan and Nikhil Wahi have been arrested, while Sameer Ramani remains at large.

18% of the workforce cut

This case therefore puts the nerves of the leaders of Coinbase to the test, while the platform is going through a difficult period. Shaken since the crypto crash, the company is no longer even in the top 10 cryptocurrency exchange platforms, according to a report by investment bank Mizuho Securities quoted by Bloomberg.

Worse still, Coinbase is no longer the world’s leading exchange for bitcoin, now dethroned by Binance, according to data from Glassnode. In this delicate context, Coinbase decided to lay off 18% of its workforce, or approximately 1,100 positions, in mid-June, while its valuation had been divided almost sevenfold in one year.