{"id":20097,"date":"2023-06-08T15:24:56","date_gmt":"2023-06-08T19:24:56","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/as-sec-brings-charges-against-binance-and-coinbase-watch-out-for-three-red-flags-before-investing-in-crypto\/"},"modified":"2023-06-08T15:24:58","modified_gmt":"2023-06-08T19:24:58","slug":"as-sec-brings-charges-against-binance-and-coinbase-watch-out-for-three-red-flags-before-investing-in-crypto","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=20097","title":{"rendered":"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto"},"content":{"rendered":"

Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.<\/p>\n

This week, the Securities and Exchange Commission sued two other major exchanges \u2014 Binance and Coinbase. Though the lawsuits contain different allegations, both contend the companies ran unregistered securities exchanges.<\/p>\n

\n

The SEC charged Binance, the world\u2019s largest crypto exchange and founder Changpeng Zhao with mishandling customer funds, and illegally serving U.S. investors. The SEC also charged Coinbase, the only publicly-traded crypto exchange company, with illegally operating an unregistered securities exchange.<\/p>\n

They both denied the charges.<\/p>\n

A cloud of uncertainty hangs over the regulation of crypto exchanges, and has helped to push down cryptocurrency prices. Will this dissuade retail investors and scare off potential crypto investors?<\/p>\n

\u201cThe future of crypto-asset regulation in the U.S. is not fully predictable,\u201d said Yuliya Guseva, a law professor at Rutgers University and head of the school\u2019s blockchain and fintech program.<\/p>\n

Law professor cites three red flags<\/strong><\/h2>\n

1. The SEC also alleges that Ripple Labs Inc., a San Francisco-based cryptocurrency payment company, sold unregistered securities with its native coin, XRP. In April, Ripple denied the SEC allegations that XRP has traded and used as a digital currency. Analysts are closely watching the outcome of this case \u2014 and await an answer to the question as to what and when digital assets are considered securities.<\/p>\n

Ripple\u2019s chief legal officer Stuart Alderoty, meanwhile, responded to the SEC\u2019s allegations with the following statement: \u201cEven if true, this only shows that the SEC\u2019s unelected bureaucrats believe they have unchecked power to issue indiscriminate closed door edicts under pain of punishment to those who don\u2019t blindly obey. We have crossed from regulation by enforcement to hubris most foul.\u201d<\/p>\n

2. As lawmakers introduce more bills, some analysts are wondering if Congress can cobble together some sort of statutory reform for crypto markets. The prospect of this happening is \u201chighly improbable,\u201d Guseva said. The SEC\u2019s enforcement division \u201chas been covering an ever-increasing swath of the crypto industry,\u201d she noted. <\/p>\n

3. The outcomes of the Binance and Coinbase cases are also of paramount importance. <\/p>\n

Binance, Coinbase and Ripple fired back<\/h2>\n

Binance said in a blog post this week: \u201cThe SEC\u2019s real intent here, instead, appears to be to make headlines.\u201d The crypto exchange added: \u201cAll user assets on Binance and Binance-affiliate platforms, including Binance.US, are safe and secure, and we will vigorously defend against any allegations to the contrary.\u201d<\/p>\n

The SEC is asking a judge to grant a temporary restraining order that would freeze assets tied to Binance.US. A hearing on the motion is scheduled for Tuesday in Washington D.C. District Court, according to the case\u2019s court docket. <\/p>\n

<\/p>\n
\n

\n \u201c<\/span>The SEC is asking a judge to grant a temporary restraining order that would freeze assets tied to Binance.US. \u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

Paul Grewal, Coinbase\u2019s chief legal officer and general counsel, said this week that \u201cthe SEC\u2019s reliance on an enforcement-only approach in the absence of clear rules for the digital-asset industry is hurting America\u2019s economic competitiveness, and companies like Coinbase that have a demonstrated commitment to compliance.\u201d<\/p>\n

Legislation, instead of litigation, is the solution, he said. \u201cIn the meantime, we\u2019ll continue to operate our business as usual,\u201d Grewal added.<\/p>\n

Rutgers law professor Guseva said the outcome of the Ripple case is also crucial. \u201cThere is a progression of SEC enforcement actions,\u201d she said. \u201cThe SEC started with primary markets, namely unregistered [initial coin offerings].\u201d<\/p>\n

\u201cRipple is one of the last cases of this generation,\u201d Guseva added. \u201cThe primary question in these cases is whether crypto assets are securities. The outcome of the Ripple litigation, therefore, will be a major win or loss for the SEC.\u201d<\/p>\n

What does the SEC want to happen?<\/h2>\n

SEC lawyers want to claw back alleged \u201cill-gotten gains\u201d from Binance and Coinbase, court papers say. <\/p>\n

But the government is not after users\u2019 money and assets, said Oleg Elkhunovich, a partner at Susman Godfrey. \u201cDisgorgement is a remedy that goes after improperly-gotten gains. Those would not be user assets. User assets should be separated,\u201d he said.<\/p>\n

The SEC complaint is alleging Changpeng Zhao, Binance\u2019s founder known as \u201cCZ\u201d, controlled customer assets and commingled them with personal holdings and company holdings.<\/p>\n

The SEC is also pressing for the court to appoint a receiver, usually a lawyer or third party who would take over control of the company. If the court agrees, the extent of that control will depend on the judge\u2019s order, Elkhunovich said.<\/p>\n

For Binance and Coinbase, however, the disgorgement attempt is serious, Guseva said. \u201cThis is a massive remedy that may destroy companies.\u201d<\/p>\n

FTX is in bankruptcy proceedings and while its co-founder and former CEO, Sam Bankman-Fried, has pleaded not guilty to criminal charges. Bankman-Fried is facing charges including fraud and conspiracy. The trial is scheduled to start in October.<\/p>\n

What do these lawsuits mean for crypto?<\/h2>\n

The lawsuits do not present \u201cexistential risks\u201d to crypto prices, according to some analysts. For example, Bitcoin prices had an initial plunge after news of the Binance lawsuit, but the price has largely rebounded to where it was.<\/p>\n

Bitcoin
\n BTCUSD,
\n +0.70%<\/bg-quote>
\n was over $26,300 and ethereum
\n ETHUSD,
\n +0.27%<\/bg-quote>
\n was over $1,800 on Thursday morning. Exchanged-traded funds focused on bitcoin have dropped lower for the week.<\/p>\n

The SEC actions have sowed \u201ceven more doubt\u201d from people eyeing cryptocurrency as a potential investment, said Shabana Nathoo, a principal at Navigo Wealth Management in Southlake, Texas.<\/p>\n

When clients have asked about crypto investments, \u201cI\u2019ve always made the caveat this is a new innovative idea and I would not put more than you can afford to lose.\u201d Nathoo\u2019s rule of thumb: It should be less than 1% of their net worth.<\/p>\n

Coinbase
\n COIN,
\n +2.84%<\/bg-quote>
\n shares are down 15% in the last five trading days, but are up more than 52% year-to-date. The Dow Jones Industrial Average
\n DJIA,
\n +0.54%<\/bg-quote>
\n is up 1.7% and the S&P 500
\n SPX,
\n +0.61%<\/bg-quote>
\n is up more than 11% from the start of the year. <\/p>\n

Who exactly is investing in cryptocurrency?<\/h2>\n

The sharp 2022 downturn for cryptocurrencies may have spooked some, but crypto isn\u2019t a fringe investment \u2013 especially for younger investors.<\/p>\n

Just over half of people aged 18 to 25 who invested said they were primarily invested in cryptocurrencies, according to recent research from the FINRA Investor Education Foundation and the CFA Institute.<\/p>\n

For comparison, 41% of these Generation Z investors said they owned individual stocks and 35% said they owned mutual funds.<\/p>\n

A different poll also shows crypto\u2019s presence. Some 22% of people said they owned some form of cryptocurrency as of April, according to Morning Consult. That\u2019s up from 19% in January.<\/p>\n

In the wake of the Coinbase lawsuit, Brian Armstrong, the exchange\u2019s CEO and co-founder made the same point about the risks for cryptocurrency.<\/p>\n

\u201cI always tell people the same thing: Don\u2019t invest money you are unwilling to lose,\u201d he said in a CNBC interview on Wednesday. \u201cThis is a new field of technology. It\u2019s one of the most important technology fields in the world. But don\u2019t speculate with assets that you are unwilling to lose.\u201d<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX. This week, the Securities and Exchange Commission sued two other major exchanges \u2014 Binance and Coinbase. Though the lawsuits contain different allegations, both contend the companies ran unregistered securities exchanges. The SEC charged Binance, the […]<\/p>\n","protected":false},"author":1,"featured_media":20098,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-20097","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nAs SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.This week, the Securities and\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=20097\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.This week, the Securities and\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=20097\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-06-08T19:24:56+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-06-08T19:24:58+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/1686252297_social.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"640\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=20097#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=20097\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto\",\"datePublished\":\"2023-06-08T19:24:56+00:00\",\"dateModified\":\"2023-06-08T19:24:58+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=20097\"},\"wordCount\":1197,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=20097#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=20097\",\"url\":\"https:\/\/ifintechworld.com\/?p=20097\",\"name\":\"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-06-08T19:24:56+00:00\",\"dateModified\":\"2023-06-08T19:24:58+00:00\",\"description\":\"Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.This week, the Securities and\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=20097#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=20097\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=20097#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto | iFintechWorld","description":"Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.This week, the Securities and","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=20097","og_locale":"en_US","og_type":"article","og_title":"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto | iFintechWorld","og_description":"Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.This week, the Securities and","og_url":"https:\/\/ifintechworld.com\/?p=20097","og_site_name":"iFintechWorld","article_published_time":"2023-06-08T19:24:56+00:00","article_modified_time":"2023-06-08T19:24:58+00:00","og_image":[{"width":1280,"height":640,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/1686252297_social.jpeg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=20097#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=20097"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto","datePublished":"2023-06-08T19:24:56+00:00","dateModified":"2023-06-08T19:24:58+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=20097"},"wordCount":1197,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["News"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=20097#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=20097","url":"https:\/\/ifintechworld.com\/?p=20097","name":"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-06-08T19:24:56+00:00","dateModified":"2023-06-08T19:24:58+00:00","description":"Last year, Bitcoin tumbled from its 2021 perch \u2014 and 2022 ended with the implosion of the cryptocurrency exchange FTX.This week, the Securities and","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=20097#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=20097"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=20097#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"As SEC brings charges against Binance and Coinbase \u2014 watch out for three red flags before investing in crypto"}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/20097","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20097"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/20097\/revisions"}],"predecessor-version":[{"id":20099,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/20097\/revisions\/20099"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/20098"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20097"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20097"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20097"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}