The Securities and Exchange Commission is investigating Coinbase. But another crypto exchange is also in the sights of regulators.
It’s starting to look like a coordinated attack.
Regulators seem to want to tighten the noose on the crypto industry, which has been asking them for clear rules for several years. Federal agencies seem to have sounded the charge against the industry.
The Department of Justice (DoJ) and the U.S Securities and Exchange Commission (SEC) announced charges on July 21 against a former Coinbase product manager, Ishan Wahi, and two others, accusing them of running an insider-trading scheme that netted them more than $1.1 million.
Wahi allegedly tipped off his brother, Nikhil Wahi, and his friend, Sameer Ramani, about upcoming token-listing announcements on the crypto exchange.
The SEC, at the same time, delivered a powerful and heavy hammer blow to the entire industry by declaring that 9 of the 25 cryptocurrencies, allegedly purchased during the scheme, were securities. In other words, the nine tokens are subject to strict financial disclosures and transparency as shares of a company.
A few days later, Bloomberg News revealed that the SEC was also investigating Coinbase (COIN) – Get Coinbase Global Inc Report, which listed these tokens. The probe focuses on the listing of digital assets that should have been registered as securities.
“[We] are confident that our rigorous diligence process — a process the SEC has already reviewed — keeps securities off our platform, and we look forward to engaging with the SEC on the matter,” Coinbase Chief Legal Officer Paul Grewal reacted on Twitter on July 25.
He headlined the tweet: “Coinbase does not list securities. End of story.”
Kraken Allegedly Violated U.S Sanctions
We now learn that Coinbase is not the only cryptocurrency trading platform in the sights of regulators. Kraken, another popular US exchange, is under investigation by the Treasury Department.
The U.S. Treasury Department’s Office of Foreign Assets Control has been investigating Kraken since 2019 on suspicion it violated U.S sanctions, according to the New York Times. Treasury is expected to impose a fine but there is no timeline.
Kraken, which allows users to buy and sell more than 100 cryptocurrencies, allegedly allowed Iranians under sanctions to use its platform.
“Kraken does not comment on specific discussions with regulators,” Kraken’s Chief Legal Officer Marco Santori said in an emailed statement. “Kraken has robust compliance measures in place and continues to grow its compliance team to match its business growth. Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.”
Treasury didn’t immediately respond to a request for comment.
The federal government has extended economic and financial sanctions financial imposed on certain countries and officials to the crypto industry. The U.S government is convinced that sanctioned entities and individuals may use cryptocurrency exchanges to circumvent sanctions.
The Treasury Department has in the past sanctioned crypto exchange BitGo and transaction processor BitPay.
To avoid penalties, some firms themselves take the lead, such as OpenSea, the “Amazon” of non-fungible tokens (NFTs), which blocked Iranian users this year. This is not the case with Kraken, a private company, which believes that its mission is to democratize finance and not to use crypto as a “weapon.”
“Sometimes the hardest thing about having power is knowing when not to use it. Our mission is better served by focusing on individual needs above those of any government or political faction. The people’s money is an exit strategy for humans, a weapon for peace, not for war,” Kraken’s CO-Founder and CEO Jesse Powell posted on Twitter last February.
“Besides, if we were going to voluntarily freeze financial accounts of residents of countries unjustly attacking and provoking violence around the world, step 1 would be to freeze all US accounts. As a practical matter, that’s not really a viable business option for us,” he added.
