- U.S. regulators charged companies in the cryptocurrency area and some leaders.
- Likewise, they opened lawsuit proceedings against personalities advertising TRX and BTT tokens.
- Coinbase asserted that the regulator lacks reasoning when it comes to dealing with commitments to the sector.
After brilliant days for the price of Bitcoin and other digital assets, the time to slow down seems to impose itself. The Federal Reserve’s interest rate hike was the first blow to that market on Wednesday. Simultaneously, the SEC announced new raids against major crypto players in the U.S. and across the industry.
Since the regulator is headed by Gary Gensler, the pressure against the digital currency market increased dramatically. The downturns of companies in the sector in the middle of last year’s so-called winter increased the misgivings of regulators. Thus, further lawsuit actions against players in that market could be described as expected.
Justin Sun, creator and top boss of Tron, was one of those affected and, in the same package, some eight figures were also singled out. Another of the regulators’ targets was the well-known company Coinbase, which operates the trading platform of the same name. Representatives of the latter reacted angrily to the news and called the SEC’s action “irrational”.
So far it is known that some of the artists wet with the measure reached a settlement with the Commission.
Regulatory pressure against the crypto sector
As already mentioned, the disdain against the crypto sector by US regulators is not new. However, what is new is the increase of that suspicion due to the multiple episodes involving the centralized exchanges’ managements. The collapse of FTX and the multiple accusations against its rival, Binance, left many doubts about the reliability of these companies.
In any case, the companies that place themselves in the group of “good actors” consider the SEC’s pressure to be disproportionate. According to the managers of these firms themselves, banks represent a greater risk for clients and investors and the pressure on them is less, at least at the moment.
The SEC’s episodes against companies in this industry seem to increase as the months go by. Crypto market players are convinced that this attitude jeopardizes innovation within the US territory. According to them, companies linked to cryptocurrencies, overwhelmed by the pressure, will leave for other, friendlier regions. This would lead to a lack of initiative and would take the US away from its leadership in technological development.
In recent cases, the same regulatory commission lashed out at the staking solutions offered by the Kraken exchange. Staking is a financial form in which holders block their tokens to serve as validators on the network. In return, they receive a percentage of the transaction fees. This secure mechanism is called Proof of Work (PoS) and its advantages over traditional financial solutions are unquestionable, say its adherents.
For enthusiasts, this makes it clear that regulators don’t mind destroying innovation in their efforts to go against the crypto sector.
Justin Sun and more than half a dozen artists received bad news
U.S. regulators have reportedly gathered evidence showing illegitimate betting by Justin Sun. The Tron founder is allegedly engaged in the practice of wash trading for unconscionable profits.This practice, which is illegal in the United States, consists of buying and selling the same asset to give the impression of a high trading volume. Three of the crypto entrepreneur’s companies have been targeted by the SEC.
The regulators also accused the parties of unregistered offers and sales of sales of TRX and BTT tokens. In an SEC statement, eight public figures are charged for promoting these tokens without disclosing that they had received payments for doing so. Apart from that, the personalities also failed to disclose the amount they had received for the promotion.
The celebrities involved were artist and singer Lindsay Lohan, professional boxer and influencer, Jake Paul, rapper and record producer, DeAndre ‘Soulja Boy’ Way. The group also includes singer Austin Mahone, porn actress Michele Mason (Kendra Lust), rapper and producer Miles ‘Lil Yachty’ McCollum, singer Shaffer ‘Neyo’ Smith and singer and entrepreneur Aliaune ‘Akon’ Thiam.
Notably, regulators reported that six of the eight celebrities agreed to pay $400,000. With this fine they were able to settle the charges without admitting or denying the findings. This onslaught against the crypto sector was a matter of time considering the long-standing suspicions about Sun’s business. Either way, regulators claim that the businessman made $31 million from the illegal sale of the aforementioned tokens.
Regarding wash trading, the SEC expresses:
“From at least April 2018 through February 2019, Sun allegedly directed his employees to conduct more than 600,000 TRX wash trades between two cryptocurrency trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX washed daily.”
Coinbase again under regulatory artillery fire
SEC clashes with Coinbase have become regular events for the crypto market. The most recent one occurred this Wednesday and featured an angry reaction from the cryptocurrency exchange platform. The regulators’ notice asserts that Coinbase is committing potential securities violations. To make this known, the SEC sent a Wells Notice.
“The Wells Notice is a letter sent by the SEC to individuals or companies to notify them of the findings of an investigation for which it will bring charges against them.”
As a result, the body targeted several of the company’s products such as the staking service, Coinbase Prime, the spot market and Coinbase Wallet. The response from the crypto company’s board was immediate and forceful. On the same Wednesday (March 22) they published their reaction on the official site. Both the SEC and the company refused to offer statements to the media. Coinbase restricted itself only to the aforementioned statement in which they express:
“We are confident in the legality of our assets and services, and if necessary, we would welcome a legal process to provide the clarity we have been advocating and demonstrate that the SEC has simply been neither fair nor reasonable in its engagement with digital assets.”
The company says it has been pursuing major efforts to engage with the SEC on registration for months. Proposals would be constantly being sent out to improve communication and clarity in an unregulated market. However, they lament that the agency refuses to respond. In doing so, they insinuate that the SEC’s actions seem focused on going against the crypto sector in order to harm it.
A battle that could end in victory for the cryptocurrencies
The SEC’s battles against cryptocurrency-related companies are on several fronts and other cases would be opening soon. For example, the refusal to approve Bitcoin spot ETFs on the exchange would sooner or later lead several companies to sue the SEC. But one of the agency’s most symbolic fights is against the firm behind the Ripple platform.
In 2020, the Commission filed charges against the company on the allegation that Ripple and its executives violated securities laws. The reason was the sale of the XRP token to raise funds to finance its business. According to the agency, the crypto company should have registered its token as a security. From Ripple’s side, they claim that this token does not meet the characteristics to be considered a security, which eventually translates into the fact that the sale was legal.
Since then, the battle between the two contenders has kept the entire crypto community on edge. On its outcome depends whether many companies will have a red or green light to expand their product spectrums in the United States. Taking the latter into consideration, both sides are desperately seeking victory in the case.
As long as there is no decision from the federal courts, the doubt as to what the nature of cryptocurrencies is will continue. For now, it is up to the regulators’ interpretation to determine whether they are securities, commodities, currencies or totally different assets. According to lawyers working on the case, quoted in Fox Business, the case is close to its end.
The media outlet says it is possible that the court will order the case to go to trial, which could prolong the limbo for months or even years. Either way, if justice sides with the SEC, an unprecedented onslaught would ensue against the crypto sector. Many companies would be branded as violators of the law for selling securities without having registered them.
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