SEC - Page 57

Coinbase, the leading cryptocurrency exchange, took an unusual legal approach before facing the U.S. Securities and Exchange Commission’s (SEC) crackdown on digital assets.

The company enlisted top lawyers to influence court rulings in other crypto-related cases, aiming to shape the legal landscape in its favor.

Prior to the SEC’s lawsuit against Coinbase on June 6, the company had submitted amicus briefs, or “friend of the court” briefs, in two other lawsuits initiated by the regulator.

By doing so, Coinbase expressed its views on legal matters that are now central to its own case. While amicus briefs are common at the U.S. Supreme Court, they are filed in only 0.1% of cases in federal trial courts.

However, the number of such briefs in SEC cases has been increasing, with crypto industry groups showing support for defendants.

Although a ruling favoring another crypto defendant in a trial court would not be legally binding for Coinbase’s case, the company could potentially use it as part of its defense strategy.

Few judges who have ruled on similar cases in the past have sided with the SEC’s approach.

Filing amicus briefs in trial courts allows the amicus to influence the direction of legal issues they care about.

It sets the stage for future discussions and considerations, as explained by Akiva Shapiro, one of the authors of a study conducted by law firm Gibson Dunn.

In recent times, the SEC has shifted its focus from targeting developers who sell unregistered digital tokens to larger players like exchanges. SEC Chairman Gary Gensler referred to the cryptocurrency industry as the “Wild West” and emphasized the need to regulate it.

Coinbase has become the primary target of the SEC, which sued the company in a Manhattan federal court. The SEC accused Coinbase of operating an unregistered exchange, broker, and clearinghouse, claiming that at least 13 of the crypto assets offered to U.S. investors were securities.

Coinbase initiated its legal offensive last year after being investigated by the SEC. The company engaged major corporate defense law firms, Gibson Dunn and Cahill Gordon & Reindel, to file briefs in two separate cases.

In one instance, Coinbase requested the dismissal of an insider trading case brought by the SEC against a former Coinbase product manager.

The main argument in Coinbase’s amicus brief, which could foreshadow its defense in its own case, is that the SEC lacks the authority to regulate many digital assets since they are not securities.

The SEC, on the other hand, argues that the determination of securities depends on the economic realities of transactions, not just the labels attached to them.

The regulator has urged judges to consider the way digital assets are marketed and the promises made to investors regarding potential profits.

Coinbase also raised concerns about the lack of clear guidelines from the SEC, arguing that industry participants need “fair notice” before a particular digital asset is deemed a security.

SEC Chairman Gensler dismissed this argument, stating that companies in the crypto space have knowingly chosen to disregard regulations.

In another amicus brief, Coinbase supported the fair notice defense in the SEC’s case against Ripple Labs, a prominent battle between the industry and the regulator prior to the Coinbase lawsuit.

The SEC sued Ripple Labs in 2020, alleging that the company conducted an unregistered securities offering worth $1.3 billion through the sale of the cryptocurrency XRP.

Coinbase argued that denying the fair notice defense to Ripple Labs would have implications for future cases.

Several other cryptocurrency industry groups and market participants have also filed amicus briefs in support of Ripple Labs.

A ruling on the Ripple case is expected later this year.

Other Stories:

Car-Maker Announces Launch of its NFT Platform With Near Protocol

Federal Reserve Pushing For Robust Oversight of Stablecoins as Form of Money

Millions of Mexicans To Be Able To Pay Internet Bills Via Bitcoin Lightning Network

Polygon co-founder Mihailo Bjelic has put forward a proposal to enhance the security of the Polygon proof-of-stake (PoS) network by upgrading it to a “zkEVM validium” version.

The suggested upgrade, as outlined in a forum post on June 20, involves leveraging zero-knowledge proofs to bolster security measures.

Polygon PoS, an Ethereum scaling solution introduced in 2019, currently handles over 2 million transactions daily and has more than $900 million locked within its contracts.

In March, the Polygon team launched another network called Polygon zkEVM, utilizing zero-knowledge proof rollups to scale Ethereum.

In Bjelic’s proposal, he suggests upgrading the existing PoS network to a zero-knowledge Ethereum Virtual Machine (zkEVM) version, aligning both networks with zero-knowledge proofs.

However, unlike the recently launched network, the updated Polygon PoS will not function as a rollup. Instead, it will be a “validium” that stores only validation proofs on layer 1, while the transaction data will reside on a separate chain.

This compromise will result in lower transaction fees for Polygon PoS compared to Polygon zkEVM. Moreover, it will enhance the security of Polygon PoS by allowing it to inherit the security features of Ethereum, Bjelic explained.

Following the implementation of this upgrade, Polygon zkEVM could be utilized for high-value transactions requiring heightened security, while Polygon PoS may become the preferred network for gaming and social media enthusiasts.

Bjelic emphasized that the upgraded Polygon PoS (zkEVM validium) would provide high scalability and low fees, making it suitable for applications with high transaction volumes and the need for affordable transactions, such as Web3 gaming and social platforms.

Bjelic proposed a timeline for the implementation, suggesting that his informal proposal could be transformed into a formal Polygon Improvement Proposal by November. Subsequently, the upgrade could be deployed on the mainnet between February and March 2024.

The introduction of Polygon zkEVM and the upgrade of Polygon PoS are part of the team’s broader vision to establish a “Supernet” that unifies diverse application-specific chains.

This initiative, referred to as “Polygon 2.0,” aims to enhance the overall capabilities and offerings of the Polygon ecosystem.

On a separate note, it’s worth mentioning that eToro delisted Polygon on June 13 due to concerns raised by the United States Securities and Exchange Commission regarding the security’s registration status. However, the Polygon team has refuted any violation of U.S. laws in its fundraising activities.

Other Stories:

Analysis: Why is Bitcoin (BTC) Price Up Today?

Fund Manager Predicts Bitcoin Will Reach $1 Million, Gives Bullish Coinbase Assessment

Bitcoin Surpasses 50% Market Dominance For First Time in 2 Years

Coinbase, a leading cryptocurrency exchange, has criticized the United States Securities and Exchange Commission (SEC) for its evasive responses during their ongoing legal dispute.

In a letter filed on June 17th with the U.S. Court of Appeals, Coinbase’s lawyers expressed their dissatisfaction with the SEC’s failure to address Coinbase’s rulemaking petition, which urges the SEC to establish a regulatory framework for digital assets.

The letter from Coinbase accused the SEC of avoiding direct answers and instead reiterating talking points when asked to address the inconsistency between its litigating position and its actions and statements elsewhere.

This response was prompted by the SEC’s request on June 13th for an additional 120 days to respond to Coinbase’s rulemaking petition.

Coinbase further claimed that the SEC is unwilling to provide updates on its decision to the Court, demonstrating its reluctance by expressing discontent even when ordered to do so.

The prolonged silence from the SEC and the resulting delays in decision-making, according to Coinbase, continue to burden the crypto industry. Furthermore, Coinbase expressed concerns that SEC Chair Gary Gensler’s actions are leading to irreparable damage to both a U.S. public company and the entire industry.

Coinbase’s Chief Legal Officer, Paul Grewal, took to Twitter on June 17th, highlighting the government’s uncommon defiance of a direct question from a federal court.

Grewal expressed hope that the court would issue a writ of mandamus, compelling the SEC to fulfill its official duties under the law, considering that Coinbase’s petition had been rejected.

Additionally, Coinbase has requested that the court impose a deadline of 60 days or less, commencing from June 13th, as an alternative to the SEC’s proposed 120-day extension.

In a separate case on June 6th, the SEC filed a lawsuit against Coinbase, alleging that the exchange had violated several securities regulations, primarily by allegedly offering cryptocurrencies that the regulator considers unregistered securities.

Coinbase’s criticism of the SEC’s lack of transparency and failure to address their concerns reflects the growing tensions between cryptocurrency companies and regulatory authorities.

As the crypto industry continues to evolve, the outcome of these legal battles will have significant implications for the future of digital assets in the United States.

Other Stories:

BUSD plummets down stablecoin rankings

Crypto trading platform suspends trading of SOL, MATIC, and ADA

SEC addresses enforcement action against Binance and Coinbase

Ripple CEO Brad Garlinghouse has emphasized that the resolution of Ripple’s legal dispute with the United States Securities and Exchange Commission (SEC) does not mark the end of the fight for regulatory clarity in the industry.

While the case is nearing its conclusion, Garlinghouse asserts that the struggle for clear regulations must persist.

Following the unsealing of the Hinman Documents on June 13 as part of the ongoing lawsuit, Garlinghouse took to Twitter to share his thoughts on the timeline of the case and express his frustration with the SEC.

In a video posted on June 17, he highlighted that the newly revealed documents indicate that the SEC intentionally created confusion regarding the rules and exploited that confusion for enforcement purposes.

Garlinghouse did not hold back in his criticism of the SEC’s conduct, characterizing it as a clear example of acting in “bad faith, plain and simple.”

According to him, this questionable behavior was evident right from the start of the legal proceedings initiated by the SEC in December 2020.

He expressed his dismay at the timing of the lawsuit, which was filed just “days before Christmas,” likening it to a cruel act akin to the Grinch stealing joy during the holiday season.

While the Ripple case might soon reach a conclusion, Garlinghouse stressed that the fight for regulatory clarity and fair treatment for the industry is far from over. He believes that continued efforts are necessary to ensure a transparent and predictable regulatory environment, not only for Ripple but for other companies operating in the cryptocurrency and blockchain space.

Garlinghouse’s remarks highlight the importance of addressing regulatory ambiguity and the need for government agencies to act in good faith when engaging with innovative technologies.

His message resonates with many in the industry who seek a clear framework that allows for responsible innovation and fosters growth while ensuring the protection of investors and consumers.

As Ripple’s legal battle draws nearer to its end, Garlinghouse’s call to action serves as a reminder that the fight for regulatory clarity must persist, urging industry participants, policymakers, and regulators to work together to establish a fair and transparent regulatory landscape for cryptocurrencies and blockchain technology.

Other Stories:

OKX and McLaren Racing Host Panel on Technology in Sports and Film at Tribeca Festival

OKX Middle East Receives MVP Preparatory License From VARA in Dubai

ZachXBT facing libel lawsuit over embezzlement allegations

Binance, one of the world’s largest cryptocurrency exchanges, has resolved a long-standing dispute with the US Securities and Exchange Commission (SEC), according to CEO Changpeng “CZ” Zhao.

The resolution brings an end to a period of regulatory uncertainty and tension that had gripped the company.

Expressing his relief on Twitter, CZ considered the SEC’s request for emergency relief unnecessary and welcomed the mutually agreed resolution. He believes the settlement will pave the way for Binance’s future growth without hindrance.

Judge Amy Berman Jackson from the U.S. District Court for the District of Columbia gave her nod to the “Proposed Stipulation and Consent Order” reached between Binance.

Binance.US, and the SEC on June 18th. This outcome is seen as a significant milestone in the crypto industry, showcasing the importance of compliance with regulatory requirements.

Under the terms of the consent order, Binance must “repatriate” all fiat and cryptocurrency assets associated with Binance.US by a specific date outlined in the court ruling.

The agreement also imposes restrictions on Binance’s global executives, preventing them from accessing the private keys of all wallets, including both cold and hot wallets.

This development enables Binance to focus on its operations and expansion while ensuring it adheres to all regulatory requirements. CZ’s reaction suggests optimism for the future, viewing this regulatory clarity as a positive step forward for Binance and the broader cryptocurrency industry.

Other Stories:

Arbitrum governance token’s (ARB) price set for reversal after airdrop

ZachXBT facing libel lawsuit over embezzlement allegations

Tether responds to controversy over accounts deactivation

The United States Securities and Exchange Commission (SEC) has opposed Dentons’ motion to dismiss the lawsuit brought by Terraform Labs and Do Kwon, arguing that the additional documents provided by Dentons do not provide sufficient grounds for dismissing the case.

Dentons, the law firm representing Terraform Labs and Do Kwon, had submitted supplementary documents during a court hearing on June 15 to support their motion to dismiss the SEC lawsuit. However, the SEC’s lawyers claimed that the documents, including a Binance.US transcript and internal SEC emails, were irrelevant to the current case. They emphasized that the Howey test clearly defines the criteria for an “investment contract” and insisted that TerraUSD (UST) should be classified as a security.

The hearing aimed to determine whether the digital assets developed by Terraform Labs should be classified as securities under the definition of an “investment contract.” Dentons argued that the algorithmic stablecoin UST should not be considered a security, emphasizing its practical purpose rather than an investment contract.

In support of their motion to dismiss, Dentons submitted additional documents, such as a U.S. House Financial Services Committee hearing on digital asset regulation and stablecoin issuance, the SEC’s request for a restraining order against Binance.US, and the Hinman emails from the SEC vs. Ripple lawsuit.

The defense lawyers highlighted a perceived “regulatory gap” in the classification of crypto assets as securities, especially as the U.S. Congress discusses regulatory frameworks for digital assets and stablecoin issuance.

They further contended that the SEC was going beyond the scope of securities laws by relying on internal emails related to “investment contracts” to determine the security status.

Judge Jed Rakoff, overseeing the case, announced that a decision on the motion to dismiss would be made by July 14.

It is worth noting that Dentons previously represented Kwon in challenging the SEC’s subpoena during the investigation of the Mirror Protocol in 2021 and a class-action lawsuit in the Singapore High Court in 2022. The law firm also represents Terraform Labs in other ongoing cases.

In a separate development, the Basic Court in Podgorica, Montenegro, has granted bail to Kwon and former Terra chief technology officer Han Chang-joon. However, Kwon has been placed in extradition custody in Montenegro as the court evaluates South Korea’s extradition request for the Terra founder.

Other Stories:

Hong Kong warns banks against placing ‘undue burden’ on crypto exchanges

OKX Middle East Receives MVP Preparatory License From VARA in Dubai

MineLab.bz Revolutionizes Cloud Cryptocurrency Mining with AI Optimization, Delivering Daily Returns of up to 3%