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On June 5, 2023, the SEC filed a complaint in the United States District Court for the District of Columbia against Binance, the world’s largest cryptocurrency exchange, and its founder, Changpeng Zhao, known to the world as CZ. 

On June 6, 2023, the SEC filed a complaint in the United States District Court for the Southern District of New York against Coinbase, the largest cryptocurrency exchange in the United States. Then, for good measure, a consortium of states sought show cause orders in connection with the company’s staking-as-a-service product. 

On June 6, 2023, the SEC also asked the Court in the Binance case for an order requiring, among other things, Binance to repatriate and freeze company assets, and repatriate customer assets. 

The complaints allege Binance and Coinbase have operated for years as unregistered securities exchanges, broker-dealers, and clearing agencies. The complaints also allege the unregistered offer and sale of securities, in addition to tokens listed on the exchanges. For Binance, those are BNB, BUSD, “Simple Earn,” “BNB Vault,” and the company’s staking-as-a-service program. For Coinbase, its staking-as-a-service program alone. 

The fundamental difference between the two cases is that the SEC alleges Binance also engaged in fraud. The allegations supporting the fraud charge include comingling and diverting billions of dollars in customer assets to CZ-controlled companies, and engaging in manipulative wash trades to create the false appearance of liquidity.  

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The SEC decided to joust with two giants at once. In the case of Binance, it seems, with a certain amount of glee. As the SKrypto blog wrote when Coinbase, Inc. received a Wells notice from the SEC in late March, “There will be no winners here.”

SEC Chair Gary Gensler, sharing his views on Binance in an interview, said the quiet part about how he felt out loud: “It would be as if the New York Stock Exchange is also operating a hedge fund and trading against its customers.… There’s parallels here to the FTX fraud manipulation that we allege against Sam Bankman Fried.” Which gets awkward when you consider Binance’s claims that Gensler should have been recused from the matter based on his personal relationship with CZ in which he gave CZ informal advice on crypto regulation.

On the other hand, Coinbase reports having met with the SEC more than 30 times to discuss a path to registration. Yet, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in the press release announcing the action, said, “Coinbase was fully aware of the applicability of the federal securities laws to its business, but deliberately refused to follow them.”

Of course, even the SEC would agree that the securities laws apply only to tokens that are securities, not all tokens, and therein lies the rub: The SEC’s refusal to share its views on the securities law status of specific tokens, except via enforcement actions.

The SEC named specific tokens as securities in their latest actions, including SOL and ADA. Oddly, some of the tokens named in the Binance complaint were not named in the Coinbase complaint even though the same tokens are listed on Coinbase and vice versa.

For those of you keeping track at home, here is a view of the tokens named by the SEC as securities in recent cases:

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A good lawyer could make a fair, honest argument that a number of tokens that appear in the chart above are not securities. One could also write the other side of the brief. Pursuing enforcement actions where reasonable minds can differ does not seem the best use of the SEC’s enforcement resources. It also does a disservice to the markets and investors.

Perhaps an act of Congress will clarify crypto regulations. Or perhaps the SEC will create a path to registration and provide some guidance on which of the most widely-held tokens, in its view, are securities outside of enforcement cases. Or we can just wait the better part of a decade while the SEC hashes it out in court.

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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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Philip Moustakis | Partner

A former senior counsel in the SEC’s Division of Enforcement, Philip advises companies and individuals at Seward & Kissel on cryptocurrencies and blockchain technology, SEC enforcement matters, other regulatory investigations, and internal investigations. As a founding member of the SEC’s Cyber Unit, Philip advised the Commission on cryptocurrencies and investigated matters involving initial coin offerings (ICOs), unlawful touting of ICOs, and other violations of the federal securities laws related to cryptocurrencies. Publicly filed enforcement matters Philip spearheaded included the SEC’s first ever Bitcoin-related enforcement action against the operator of Bitcoin Savings & Trust, a Bitcoin-denominated Ponzi scheme, settled proceedings against an operator of a Bitcoin-related social media marketing venture and a popular Bitcoin betting site for the offer and sale of unregistered securities, and settled proceedings against an operator of unregistered cryptocurrency-denominated securities exchanges and broker-dealers.

“The SEC is a principles based regulator, and it will assert its jurisdiction over any securities offering or transaction, as it has done since the onset of the ICO craze, regardless of the technology used to facilitate such an offering.”

Philip’s thoughts on the recent SEC enforcement action against Kik Interactive, Inc. as published in the Crowdfund Insider article “Former SEC Senior Counsel Comments on Kik Ruling: Kik Could Have Benefited From Traditional Capital Markets Lawyer"


Grace Dahlstrom | Law Clerk

Grace Dahlstrom is a law clerk in the Business Transactions Group.  Grace received a B.A., cum laude, from Scripps College and a J.D. from the University of California, Berkeley, School of Law.


Naomi Boico | Summer Associate

Naomi Boico is currently a summer associate at Seward & Kissel. She attends Brooklyn Law School. 


Henry Deteskey | Summer Associate

Henry Deteskey is currently a summer associate at Seward & Kissel. He attends Fordham Law School.