Former SEC Chief Dismisses Coinbase’s Regulatory Safe Harbor Claims

Former SEC Chief Dismisses Coinbase’s Regulatory Safe Harbor Claims

John Reed Stark, a former chief of the U.S. Securities and Exchange Commission (SEC) Office of Internet Enforcement, has refuted Coinbase’s claims of having a “regulatory safe harbor” and the notion that the SEC is constrained by a certain doctrine. Stark added that the argument that Coinbase’s business activities were endorsed by the SEC when it approved its initial public offering (IPO) has no basis in law or fact.

Response to Wells Notice

Coinbase disclosed its response to the Wells notice it received from the SEC in March, where it expressed opposition to the SEC’s enforcement actions. The crypto exchange also suggested that the SEC had approved its core business when it allowed the IPO to go ahead. Coinbase went public in April 2021.

SEC Approval of Coinbase’s Registration Statement

Stark rejected the assertion that the SEC’s approval of Coinbase’s registration statement equated to an endorsement of the exchange’s activities. He explained that the SEC approved the registration statement to ensure that Coinbase had made proper disclosures in its application.

Form S1 Registration Statement

Stark also cited Coinbase’s Form S1 Registration Statement under the Securities Act of 1933, which disclosed that there was regulatory uncertainty regarding the status of its activities, and that the exchange could be subject to various fines, penalties, orders, and actions. Stark emphasized that the “no approval clause” was a sufficient warning to Coinbase executives who may face potential jail time if the crypto exchange loses its fight against the SEC.


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