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Shares of cryptocurrency exchange Coinbase fell more than 20% at the open on June 6. At press time, the stock has recouped some losses and is currently trading at $50.14 from an intraday low of $46.43. The company’s market capitalization is currently $13.7 billion.
On the same day, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase, alleging the activities of an unregistered national securities exchange, broker and clearing agency, and failure to register the offer and sale of its service program. SEC Chairman Gary Gensler commented:
“The alleged failures of Coinbase deprive investors of critical safeguards, including codes of practice to prevent fraud and manipulation, proper disclosure, conflict of interest safeguards, and regular reviews by the SEC.”
Coinciding with the SEC announcement, a task force consisting of 10 state security regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin issued a arraignment order against Coinbase. The order alleged that “Coinbase violates securities law by offering accounts in its staking incentive program to Alabama residents without registering to offer or sell these securities.”
Under the order, Coinbase has 28 days to respond and show why they should not be ordered to stop and refrain from selling unlisted securities in Alabama.
On April 14, 2021, Coinbase shares debuted on the US NASDAQ exchange. The stock is currently down 88% from its all-time high of about $435 on listing day. As part of the listing requirement, the exchange was required to file a Form S-1 in order to register with the SEC and obtain regulatory approval.