Shares of cryptocurrency exchange Coinbase plunged more than 20% at the open on June 6. At press time, the stock had pared some losses and was trading at $50.14, off an intraday low of $46.43. The company's market capitalization is currently $13.7 billion.
On the same day, the SEC filed a lawsuit against Coinbase alleging that it operated an unregistered national securities exchange, broker-dealer and clearinghouse and failed to register the offering and sale of its crypto-as-a-service program. SEC Chairman Gary Gensler commented : "Coinbase's alleged failure deprived investors of important protections, including a rulebook against fraud and manipulation, proper disclosures, safeguards against conflicts of interest, and routine SEC inspections."
The SEC announcement comes as a group of 10 state security regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin A working group of institutions issued a show-cause order against Coinbase . "Coinbase violated the securities laws by offering its staking rewards program accounts to Alabama residents without registering to offer or sell those securities,” the order said.
According to the order, Coinbase has 28 days to respond and explain why they should not be directed to cease and desist from selling unregistered securities in Alabama.
On April 14, 2021, Coinbase stock was listed on the NASDAQ exchange in the United States. Shares are now down 88% from their all-time high of about $435 hit on the day of the listing. As part of their listing requirements, exchanges must file Form S-1s to register with the SEC and obtain regulatory approval.
