The SEC is challenging Coinbase's role in distributing assets of the financially crippled Celsius Network.
Discover the regulatory concerns that could influence cryptocurrency asset management, and how this lawsuit could shape future interactions between cryptocurrency platforms and regulators.
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SEC Challenges Coinbase's Involvement
On the 22nd, the U.S. Securities and Exchange Commission (SEC) submitted a document to the bankruptcy court opposing the role that Coinbase plays in the asset distribution plan of the financially troubled cryptocurrency lending firm, Celsius Network.
Celsius, after filing for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, is attempting to return funds to its former users under new management.
The company is seeking the support of Coinbase in this endeavor.
Celsius Seeks Court Permission to Employ Coinbase as an Agent
Specifically, Celsius is asking the bankruptcy court for permission to employ Coinbase as an agent for the distribution of assets to overseas users. Regarding this, the SEC has made the following allegations.
The contract between Celsius and Coinbase includes concerns that the SEC has raised in its lawsuit against Coinbase.
The role that Coinbase is expected to play in this contract goes far beyond simply acting as an agent for asset distribution; it includes intermediary services and master trading services.
SEC's Claim Against Coinbase
The SEC has claimed in its lawsuit against Coinbase that the company should have registered as an exchange, broker, or clearing agency, but failed to do so while conducting businesses involving what are considered to be securities in the form of cryptocurrencies.
The SEC objects to Coinbase fulfilling such roles without registration in the distribution of Celsius' assets.
The SEC also pointed out that although Celsius has written in its application that Coinbase will not provide intermediary services, significant provisions regarding this are missing from the actual contract.
Paul Grewal, Chief Legal Officer of Coinbase, has posted the following in response to the SEC's allegations.
Ongoing Litigation between SEC and Coinbase
In June, the SEC filed a lawsuit alleging that Coinbase operates as an unregistered securities exchange, trading at least 13 types of 'crypto securities' without registering them with regulatory authorities.
One major focus of the lawsuit is the definition of 'investment contracts.' Legal scholars from prestigious U.S. universities submitted a court advisory in August supporting Coinbase, discussing this issue from a defensive standpoint.
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