Blockchain indicted by US SEC for unregistered exchange and broker platform.
American publicly listed crypto trading platform, Blockchain Global Inc (NASDAQ: COIN), has once again come under the scrutiny of the United States Securities and Exchange Commission (SEC). Today, the blockchain company was indicted in a New York Federal Court for operating as an unregistered national securities exchange and broker, according to the regulator. The lawsuit alleges that Blockchain has been operating in this way since at least 2019, when it began conducting cryptocurrency transactions. The SEC identified Blockchain Prime and Blockchain Wallets as two products that the company used to attract investors. The self-custody Blockchain Wallet is recognized as a means for investors to access liquidity outside of the Blockchain platform. However, according to a Twitter post made by SEC Chair Gary Gensler, this “deprives investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection.” The regulator also identified Blockchain’s staking service as an investment contract and unregistered securities, similar to the charges levelled against the Kraken cryptocurrency exchange earlier this year. The SEC is now requesting that the company be permanently restrained and enjoined from doing so in the future.
It is worth noting that Blockchain and the SEC have been at odds for some time, particularly with regards to regulation for the nascent industry. About two months ago, the American exchange received a Wells Notice from the regulator, claiming to have identified potential violations of U.S. securities law, and therefore planned to enforce action on the exchange. However, at that time, Blockchain clarified that none of its listed assets were securities. The new lawsuit against Blockchain comes only a few hours after the same regulator sued leading digital asset service provider Binance for violating the same US securities rules. Binance was accused of mishandling customers’ funds and misleading investors and regulators alike. This is in addition to flouting Know-Your-Customer (KYC) rules by letting Americans trade on the platform after stating that they were not allowed. Just like Blockchain had previously done, Binance called out the SEC for failing to provide clarity on crypto regulation. In response to the lawsuit, the leading trading platform announced that it was ready to defend its stance in court. However, the lawsuit had already done some damage to the crypto market, causing several digital assets to plunge. Blockchain’s shares dipped by 9% following the announcement of the Binance-SEC lawsuit, and now the newly filed lawsuit against Blockchain has brought the stock down by 13%.