Coinbase stock plunges 20% on SEC lawsuit

Coinbase stock plunges 20% on SEC lawsuit

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Shares of the Coinbase cryptocurrency exchange plunged more than 20% at the open on June 6. At press time, the stock has pared some losses and is currently trading at $50.14, compared with a daily low of $46.43. The company’s market capitalization currently stands at $13.7 billion.

On the same day, the United States Securities and Commission filed a lawsuit against Coinbase, alleging the operations of an unregistered national stock exchange, broker, and clearing agency and failure to register the offer and sale of its staking program as a crypto asset service. SEC Chairman Gary Gensler commented:

“Coinbase’s alleged failures deprive investors of critical protections, including rule books that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine scrutiny by the SEC.”

Concurrent with the SEC’s announcement, a working group comprised of 10 state security regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin issued an Order to Show Cause against Coinbase. The order alleged that “Coinbase violates securities law by offering its gambling rewards program accounts to Alabama residents without a registration to offer or sell these securities.”

Under the order, Coinbase has 28 days to respond and show why they should not be ordered to cease and desist from selling unregistered securities in Alabama.

On April 14, 2021, Coinbase shares debuted on the US Nasdaq stock exchange. The shares are currently 88% below their all-time high of around $435, reached on listing day. As part of its listing requirement, the exchange had to file an S-1 form to register with the SEC and get regulatory approval.

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