Crypto: Coinbase in the sights of the American stock exchange 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 is offering its users securities that should be registered in its eyes.

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

Eager 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 relevant legislation titles. In other words, the SEC suspects Coinbase is offering its users stocks that should be registered in its eyes.

If so, this would mean that the US platform would have to request a change of status with the SEC to be allowed to offer its users access to the securities in question. In this context, the regulator will then 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, Coinbase’s Chief Legal Officer Paul Grewal posted an editorial with the evocative title on the company’s blog: “Coinbase doesn’t list stocks, end of story”.

Former Coinbase executive accused of insider trading

The platform’s aggressive tone 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 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, based on confidential information. At the heart of this scheme to accumulate this jackpot, we find Ishan Wahi, former product manager of Coinbase, on the team charged with listing cryptocurrencies on the platform.

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Due to its privileged position, the latter had early access to sensitive information, such as the calendar for registering new crypto-assets on Coinbase. According to the SEC, Ishan Wahi used his status at the company to notify his brother, Nikhil Wahi, and a friend, Sameer Ramani, between June 2021 and April 2022 of upcoming cryptocurrency quotes on the platform, so that they can transact. in its virtual assets before they are publicly introduced on Coinbase.

Once the new cryptocurrencies were listed on the platform, their price skyrocketed, thus greatly enriching the trio. Despite the precautions taken to avoid being exposed, in particular using anonymous ethereum wallets, last April a Twitter account launched the alert, prompting the American authorities to seize the file. Ishan and Nikhil Wahi have been arrested, while Sameer Ramani remains a fugitive.

Cut 18% of the workforce

This case therefore puts a strain on the nerves of Coinbase’s top management, while the platform is going through a difficult period. Shaken by the cryptocurrency crash, the company is no longer even in the top 10 cryptocurrency exchange platforms, according to a report by investment bank Mizuho Securities cited by Bloomberg.

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

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