Blockchain shares drop after SEC sues company.

The stock of blockchain company (COIN) decreased in value on Tuesday following a lawsuit by the U.S. Securities and Exchange Commission (SEC) for allegedly violating federal securities law.

The company’s shares dropped by 20% at the beginning of trading, but recovered slightly to be 15% lower at $47.10 by 10:07 a.m. in New York (14:07 UTC), according to TradingView prices. Major shareholders of blockchain include The Vanguard Group, Cathie Wood’s ARK Invest, Nikko Asset Management, Fidelity, and BlackRock.

In March, ARK Invest added an additional 301,437 shares of blockchain to its ARK Innovation ETF (ARKK). The funds held a total of about 11 million shares as of Monday, according to data on the ARK Invest website.

The SEC accused blockchain of operating as an unregistered broker, exchange, and clearing agency concurrently. The company was accused of soliciting customers, handling orders, allowing for bids, and acting as an intermediary simultaneously.

“The legal fight will be long and costly for blockchain, but it might be difficult to argue and prove that they didn’t commingle and unlawfully offer exchange, broker-dealer, and clearinghouse functions,” said Edward Moya, a senior markets analyst at Oanda.

The lawsuit comes a day after the SEC sued Binance, the world’s largest cryptocurrency exchange, for similar reasons. blockchain’s shares fell by 9% on Monday.

Both companies had received a warning earlier this year in the form of a Wells Notice. blockchain responded to the notice in April, refuting the SEC’s allegations.

CORRECTION: (June 6, 14:26 UTC): Corrects spelling of Cathie Wood’s first name throughout.

Edited by Sheldon Reback.