Coinbase (COIN) stock sank nearly 20% in the open market on Tuesday as the Securities and Exchange Commission sued the cryptocurrency exchange, alleging it acted as an unregistered exchange and broker.
The SEC alleged in a lawsuit filed in federal court that the crypto company violated securities law by failing to register with the SEC before operating in the United States. Specifically, the SEC states that Coinbase acted as an exchange, broker, and clearing agency without registering with the agency.
“Coinbase’s alleged failures deny investors important protections, including rulebooks preventing fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspections by the SEC,” SEC Chairman Gary Gensler said in a statement.
Coinbase did not immediately respond to a request for comment from Yahoo Finance on the lawsuit.
Coinbase, the largest crypto-asset exchange in the United States, held more than $130 billion in assets on its platform as of March 31, according to the company.
The SEC’s complaint on Tuesday comes a day after the SEC filed a lawsuit against Binance Holdings, the world’s largest cryptocurrency exchange. That lawsuit alleged similar wrongdoing to Binance including that the cryptocurrency exchange failed to register as an exchange, broker or clearing agency.
The cryptocurrency space has been in turmoil ever since FTX breakdown late last year. The popular cryptocurrency exchange, once worth $32 billion, fell apart throughout the fall of 2022 as an increasing number of details of alleged fraudulent activity were revealed. Former FTX CEO Sam Bankman-Fried is now facing criminal charges for allegedly stealing billions in FTX clients’ funds and defrauding investors.
Coinbase has been one of the remaining options for investors to buy cryptocurrency with ease as bitcoin has almost doubled since November and breached the $30,000 mark again before dropping this week.
Josh is Yahoo Finance Correspondent.
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