Coinbase CLO Responds to SEC’s Opposition

Paul Grewal, the Chief Legal Officer of Coinbase, took to Twitter on October 4, 2023, to address the U.S. Securities and Exchange Commission’s (SEC) recent filing against the company. The SEC has opposed Coinbase’s motion to dismiss the case against it, a move that Grewal describes as “more of the same old same old.”

In a series of tweets, Grewal criticized the SEC for making “sweeping claims of what the law is/must be without any legal citation.” He pointed out specific pages in the SEC’s opposition brief where these claims were made, such as pages 8, 17-18, and 21.

Grewal emphasized that the assets listed on Coinbase‘s platform are not securities and therefore fall outside the SEC’s jurisdiction. He cited recent court decisions that have clarified this point, stating, “Court decisions over the past several months have made that plain.”

The Chief Legal Officer also took issue with the SEC’s broad interpretation of what constitutes a security. He argued that by the SEC’s logic, “everything from Pokemon cards to stamps to Swiftie bracelets” would also be considered securities. This interpretation, he said, is neither supported by existing law nor reasonable.

Grewal expressed concern over the SEC’s “continued regulation by enforcement approach,” which he believes ignores the voice of the 52-million strong crypto constituency in the U.S. He mentioned that last week, founders from over 40 crypto companies joined the Stand With Crypto campaign in Washington, D.C., to advocate for legislation that “protects consumers, enables innovation, and creates jobs and opportunities in the U.S.”

Coinbase is set to file its reply to the SEC’s opposition on October 24, 2023. Grewal concluded his Twitter thread by stating, “We look forward to filing our reply on Oct 24. As always, we appreciate the court’s consideration of our case.”

Image source: Shutterstock


Tagged : / / / / / / / / /

Terraform Labs CEO Asks for Dismissal of SEC Charges

In a recent motion filed to dismiss the charges leveled against him by the Securities and Exchange Commission (SEC), Do Kwon, co-founder and CEO of Terraform Labs, argued that the claims are invalid and that the SEC lacked proper jurisdiction to bring charges against him and his company. Kwon’s counsel stated that the tokens and projects developed by Terra were “aimed at the world” and did not specifically target U.S. investors, making the SEC’s claims invalid.

The SEC had previously claimed that tokens including MIR, LUNA (LUNA), and UST are securities, but Kwon pushed back against this argument in his motion to dismiss the charges. The South Korean district court recently dismissed security violation charges against the co-founder of Terraform Labs, Hyun-seong Shin, deeming LUNA as a non-security under Korea’s Capital Markets Act. This ruling makes Kwon’s motion right only in connection to LUNA.

However, recent developments suggest that Kwon’s legal troubles may not be over. In a press conference after the Seoul Southern District Prosecutor’s office indicted 10 people involved in the collapse of the Terra stablecoin ecosystem, the prosecutor reportedly identified Signum as the Swiss bank account where Kwon transferred more than 10,000 Bitcoin (BTC) from the Terra platform and the Luna Foundation Guard to a cold wallet, which was then converted to fiat.

The Financial and Securities Crime Joint Investigation Unit of the Seoul Southern District Prosecutor’s office is reportedly monitoring Bitcoin owned by Luna Foundation Guard and has determined that the transferred amount, which aligns with the SEC complaint, is approximately $100 million (equivalent to 130 billion won). The prosecutors clarified that the $100 million was not kept solely in the Signum account and was dispersed in various locations. It was verified that a portion of the funds was transferred to the Kim & Chang law firm account to cover legal fees, while the rest amounted to billions of won.

Kwon’s legal troubles began when the SEC filed charges against him and his company, which preempted his arrest in Montenegro, where he currently faces extradition. South Korean authorities had issued an arrest warrant for Kwon in September, and U.S. federal prosecutors unveiled criminal charges against him shortly after he was arrested a month ago.

In conclusion, while Do Kwon has requested the dismissal of SEC charges against him, recent developments suggest that his legal troubles may not be over yet. It remains to be seen how this situation will develop and how it will affect the future of Terraform Labs.


Tagged : / / / / /

Crypto Lawyers Dispute SEC Chief’s Jurisdiction Claims

The Chairman of the SEC, Gary Gensler, recently claimed in an interview that all cryptocurrencies, except Bitcoin, fall under the agency’s jurisdiction. However, his comments have been disputed by lawyers for the cryptocurrency industry who argue that the SEC must prove its case in court for each token individually before it can claim jurisdiction over them.

Jake Chervinsky, a lawyer and policy lead at the crypto advocacy group the Blockchain Association, argued in a tweet that Gensler’s opinion is not the law, despite his claimed command over the crypto sector. He further stated that until the SEC proves its case in court for each individual token, it lacks authority to regulate any of them.

Another lawyer, Logan Bolinger, also pointed out that Gensler’s opinions on what is or isn’t a security are not legally dispositive, meaning that it’s not the final legal determination. He added that judges, not SEC chairs, ultimately determine what the law means and how it applies.

The policy lead at the Bitcoin Policy Institute, Jason Brett, said that Gensler’s comments should be feared rather than celebrated. He stated that there are ways to win other than via a regulatory moat.

Gabriel Shapiro, the general counsel at investment firm Delphi Labs, outlined in a series of tweets the enforcement difficulties the SEC would have to carry out on the industry to cement its rule. Shapiro pointed out that according to Gensler, over 12,300 tokens worth around $663 billion are unregistered securities that are illegal in the U.S. The SEC would have to file a lawsuit against each token creator, which would be seemingly impossible to enforce.

Shapiro also noted that the SEC has handled crypto in two ways: either fining token creators and requiring the issuer to register, or fining them and ordering the created tokens to be destroyed and delisted from exchanges.

The comments made by Gensler have sparked concern in the cryptocurrency industry. Lawyers have highlighted the need for the SEC to prove its case in court for each token individually before it can claim jurisdiction over them. Meanwhile, the SEC faces the seemingly impossible task of enforcing its rule against over 12,300 tokens. The situation remains unresolved, and the crypto industry will be closely watching to see how it develops in the coming weeks and months.


Tagged : / / / / /
Bitcoin (BTC) $ 37,926.16 0.46%
Ethereum (ETH) $ 2,037.94 0.91%
Litecoin (LTC) $ 69.82 0.07%
Bitcoin Cash (BCH) $ 222.74 0.23%