Coinbase Shares Drop After SEC Announces Lawsuit

Coinbase (COIN) shares lost 16% of their value on Tuesday after the SEC announced a lawsuit against the firm.

COIN – Weekly Chart

COIN – Weekly Chart

Coinbase saw its shares slump on the day from over $60 to $50, and there is potential for further losses if the week closes on a bearish note. 

The action against Coinbase comes only 24 hours after a similar lawsuit against rival firm Binance as the regulator turns the screw against the crypto industry. The motion accuses its Prime and Wallet units of operating as unregistered brokers. Binance lost over $780 million in deposits in 24 hours, while Coinbase suffered $57 million in withdrawals in the hour following its lawsuit. 

The SEC said that Coinbase combines the traditional services of an exchange, broker, and clearing agency without registering any of those functions with the commission, as required by law. 

“While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled.” 

“Today’s action seeks to hold Coinbase accountable for its choices,” its statement said. 

The latest efforts by the SEC to tackle the unregulated cryptocurrency sector could hurt prices. Bitcoin traded 6% lower over the last 24 hours, while Binance Coin (BNB) lost 10%. 

“The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation,” said Paul Grewal, Coinbase chief legal officer. “In the meantime, we’ll continue to operate our business as usual.” 

Investors should keep an eye on the customer withdrawals at Coinbase, and a bearish close for the week could see the stock move toward its all-time lows near $31.

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