The U.S. Securities and Exchange Commission (SEC) and crypto exchange Coinbase have locked horns over the role that collapsed crypto lender Celsius wants the exchange to play as a distribution agent.
In a Friday filing, the top regulator said that Celsius’ plan to use Coinbase as a distribution agent for international customers “[goes] far beyond the services of a distribution agent, contemplating brokerage services and master trading services.”
Celsius was one of many companies in the space that went bust last year. It is now working to give back former customers their cash under its new management, and wants Coinbase’s help to do so.
But Friday’s filing said that the plan to use Coinbase service may “implicate many of the concerns raised in the SEC’s District Court action against Coinbase”—that is, that the exchange would act as a middleman connecting buyers and sellers of crypto, according to the SEC.
The regulator sued the San Francisco-based company in June, alleging that it should have registered as an exchange, clearing house, and broker and that it also sold unregistered securities.
Coinbase Chief Legal Officer Paul Grewal said on Twitter Monday: “I wonder, why would the SEC object to a trusted U.S. public company taking on this role?”
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… https://t.co/5i1aJDiPXp
— paulgrewal.eth (@iampaulgrewal) September 25, 2023
“We look forward to addressing this with the bankruptcy court and undertaking our important role to make Celsius customers whole,” he added.
The SEC—as well as the DOJ, FTC, and the CTFC—hit Celsius with a lawsuit in July, alleging that it repeatedly lied to customers about how safe the platform was and that it sold unregistered securities.
Celsius promised investors huge returns and called itself “the safest place for your crypto” but it stopped user withdrawals last June due to “extreme market conditions.”
The Department of Justice has since hit its ex-boss Alex Mashinsky with seven criminal charges and frozen his assets.
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