(Reuters) — The U.S. Securities and Exchange Commission sued cryptocurrency platform Coinbase on Tuesday, the second lawsuit in two days against a major crypto exchange, in a dramatic escalation of a crackdown on the industry and one that could dramatically change a market that has been largely run outside the regulation.
The SEC on Monday took aim at Binance, the world’s largest cryptocurrency exchange. The SEC accused Binance and its CEO, Changpeng Zhao, of running a “web of fraud.”
If successful, the lawsuits could change the crypto market by successfully asserting the SEC’s jurisdiction over the industry, which has argued for years that tokens do not constitute securities and should not be regulated by the SEC.
“The two cases are different but overlapping and point in the same direction: the SEC̵7;s increasingly aggressive campaign to bring cryptocurrencies under the jurisdiction of the federal securities laws,” said Kevin O’Brien, a partner at Ford O’Brien Landy and a former federal prosecutor. “If the SEC prevails in either case, the cryptocurrency industry will change.”
In its complaint filed in Manhattan federal court, the SEC said that since at least 2019, Coinbase has made billions of dollars by acting as an intermediary on crypto transactions, while avoiding disclosure requirements to protect investors.
The SEC said Coinbase traded at least 13 cryptoassets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.
Coinbase suffered about $1.28 billion in net customer outflows after the lawsuit, according to initial estimates from data firm Nansen.
Paul Grewal, Coinbase’s general counsel, said in a statement that the company will continue to operate as usual and has “demonstrated commitment to compliance.”
Tuesday’s SEC lawsuit seeks civil fines, recovery of ill-gotten gains and injunctive relief.
On Monday, the SEC accused Binance of increasing trading volumes, diverting client funds, improperly commingling assets, failing to restrict US clients from its platform and misleading clients about its controls.
Binance vowed to vigorously defend itself against the lawsuit, which it said reflected the SEC’s “misguided and willful refusal” to provide clarity to the crypto industry.
Clients withdrew around $790 million from Binance and its US subsidiary after the lawsuit, Nansen said.
On Tuesday, the SEC filed a motion to freeze assets belonging to Binance.US, Binance’s American subsidiary. The holding company Binance is based in the Cayman Islands.