The SEC has mounted a two-pronged attack against the crypto sphere by bombarding Binance and Coinbase with high-profile lawsuits. While the apex American financial regulator has likely caught Binance with its proverbial pants down, its case against Coinbase stands on quite flimsy legs.
For the benefit of those who might yet be unaware, the SEC filed 13 charges against Binance on Monday, accusing the world's largest crypto exchange of subverting established rules to allow high-net-worth individuals in the US to access Binance's offshore services, comingling of customer and corporate assets and funds, wash trading via affiliated entities, lack of KYC, and outright embezzlement on the part of Binance's CEO, Changpeng Zhao (CZ). Additionally, the apex financial regulator in the US has now declared some of the most popular tokens as "unregistered securities," thereby attempting to bring the entire crypto sphere under its own jurisdiction.
Then, on Tuesday, the SEC filed a separate lawsuit against Coinbase, accusing the crypto exchange of operating an "unregistered national securities exchange, broker, and clearing agency."
The SEC Files a Restraining Order Against Binance US
The SEC filed a restraining order requesting that the judge freeze https://t.co/sqCToQ0vpT' assets
"The SEC respectfully submits that this relief is necessary on an expedited basis to ensure the safety of customer assets and prevent the dissipation of available assets" pic.twitter.com/fzBGTQjG3H
— Leo Schwartz (@leomschwartz) June 6, 2023
As an illustration of the SEC's confidence in the evidence that it has gathered against Binance, the regulator has just filed a restraining order against Binance, requesting the presiding judge to freeze the assets of Binance US.
There's an important stipulation here that the SEC is asking that https://t.co/sqCToQ0vpT still be able to honor customer withdrawals — the measure is instead intended to prevent the defendants (including CZ) from withdrawing customer assets pic.twitter.com/UK3FzgJO2j
— Leo Schwartz (@leomschwartz) June 6, 2023
Do note that the restraining order explicitly exempts customer withdrawals, lending credence to the thesis that this measure is squarely aimed against CZ and other Binance executives.
Not to worry. Binance can still halt withdrawals claiming that their customers haven’t completed KYC AML while blaming the SEC. https://t.co/MB3g0CwlLJ
— Bitfinex'ed 🔥🐧 Κασσάνδρα 🏺 (@Bitfinexed) June 6, 2023
Nonetheless, Binance can still throw a wrench in this scheme by hiding behind KYC and AML protocols.
The SEC's complaint against @Binance has been flagged for failure to comply with court rules.
The rules require the complaint to list the full residence address of each party--including the defendants (Binance, CZ et al).
Getting those addresses could be easier said than done. https://t.co/c3zC3fqNvX pic.twitter.com/y2Y6Uj1Vxk
— MetaLawMan (@MetaLawMan) June 6, 2023
So far, there is only one major discrepancy in the SEC's case against Binance – the lack of a valid residential address of CZ and some of the other defendants. Nonetheless, this lacuna is not expected to derail the broader proceedings.
The SEC has Bungled its Efforts to Corner Coinbase
While Binance is likely to require a miracle to escape the SEC's clutches, Coinbase is another matter entirely.
2/ After he was confirmed to his post as Chairman of the SEC, Gensler testified to Congress, on May 6, 2021, that:
THE SEC DOES NOT HAVE AUTHORITY FROM CONGRESS TO REGULATE CRYPTO EXCHANGES.
Watch this 👇 pic.twitter.com/mk48S36FHm
— MetaLawMan (@MetaLawMan) May 3, 2023
As explained in the tweet above, the SEC Chair, Gary Gensler, had testified in Congress on the 06th of May, 2021, that the agency did not have the authority to regulate crypto exchanges. Such a pivotal statement is unlikely to have been issued without a broad-based consensus at the SEC.
4/ If the SEC follows through on its threat to sue Coinbase, the Coinbase legal team will surely zero in on the communications within the SEC leading up to Gensler’s May 6, 2021 testimony.
All testimony of an SEC Chairman is thoroughly vetted internally before they testify.
— MetaLawMan (@MetaLawMan) May 3, 2023
Coinbase's lawyers can drag Gensler and the SEC through the proverbial mud by highlighting the agency's internal correspondence that would have allowed the agency's Chair to make such a pivotal statement in Congress.
6/ Because no Chairman in their right mind would testify before Congress that the SEC does NOT have authority to do something unless they were absolutely sure that there was no legal basis at all to claim that authority.
— MetaLawMan (@MetaLawMan) May 3, 2023
After all, which SEC Chair would invite the wrath of the US lawmakers by falsely claiming jurisdiction in a matter where none exists?
9/ Imagine the emails, meeting notes, texts and testimony from SEC staff saying essentially–
What is he talking about?
We suddenly claim this authority that we told Congress and the American public we Do Not Have?
Where did he get his law license?
(Gensler is not a lawyer)
— MetaLawMan (@MetaLawMan) May 3, 2023
This is, therefore, as much a matter of the SEC's internal inconsistencies as it is of Coinbase's selling of unregistered securities.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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