- The SEC is objecting to Coinbase’s proposed role as a distribution agent in Celsius’ restructuring plan.
- Coinbase chief legal officer Paul Grewal criticised the SEC on social media, which the company has done several times in the past.
The war of words between Coinbase and the Securities and Exchange Commission is heating up.
Coinbase chief legal officer Paul Grewal stated today on X, formerly Twitter, that the company was “looking forward” to challenging the US regulatory agency in court over its objection to Celsius’ new restructuring scheme.
“Coinbase is proud to engage with Celsius to distribute crypto back to its customers,” Grewal said. “I wonder, why would the SEC object to a trusted US public company taking on this role? We look forward to addressing this with the bankruptcy court and undertaking our important role to make Celsius customers whole.”
On Friday afternoon, the SEC filed an objection to Celsius’ reorganisation plan, which would see the bankrupt crypto lending company use Coinbase as a distribution agent for Celsius’ international debtors.
Celsius filed for bankruptcy in July 2022. Its former CEO, Alex Mashinsky, has been charged by the Department of Justice with defrauding Celsius customers and manipulating markets for Celsius’ native token, CEL.
According to the SEC, the terms of agreement signed by Coinbase “go far beyond the services of a distribution agent” and involve providing services — such as brokerage and master trading services — already flagged as illegal by the agency in its ongoing lawsuit against Coinbase.
Furthermore, the regulator pointed out that Celsius debtors hadn’t actually agreed yet to pursue brokerage services from Coinbase. The SEC asked the court to not approve the deal until the inconsistency was resolved.
”It seems like Coinbase has decided to adopt a ‘the best defense is a good offense strategy’ for dealing with the SEC,” regulatory expert and former Citigroup executive Sean Tuffy told DL News. “I’d imagine the SEC taking a few L’s in court recently has emboldened them a bit. There’s also an element of playing to the anti-Gensler crowd in Congress here. That said, taking such a publicly antagonistic stance definitely could backfire.”
“It’s also interesting that Coinbase came in so hot in this case because, near as I can tell, the SEC hasn’t actually objected to anything,” Tuffy added. “They just raised some potential issues and it ‘reserves its rights to object’ once it sees all the documentation.”
A contentious relationship
This isn’t the first time Coinbase executives have gotten vocal against the US regulatory agency.
Coinbase CEO Brian Armstrong stated in June: “Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America.”
He also previously accused the SEC of “really sketchy behaviour,” and claimed the agency was “engaging in intimidation tactics behind closed doors.”
Grewal’s challenge to the SEC comes in the wake of the regulator’s two recent losses in court against Ripple and Grayscale.
In July, a US judge ruled that crypto company Ripple Labs had not violated federal securities law by selling its XRP token on public exchanges, although she did say that sales to institutional investors were sometimes illegal transactions.
A month later, another court declared that the SEC’s decision to reject Grayscale’s application to convert its Bitcoin trust into an ETF had been “arbitrary and capricious.”
Both court decisions were seen as significant wins for the sector, as the SEC has been widely criticised by industry leaders and lawmakers alike for its regulatory strategy towards crypto.
Tom Carreras is a markets correspondent at DL News. He is based out of Costa Rica. Got a hot tip? Reach out to him at tcarreras@dlnews.com