Allowing Coinbase to go public wasn’t a corporate ‘blessing’: SEC

The U.S. Securities and Exchange Commission (SEC) argued in court that approval of a company’s S-1 application to go public does not represent a “blessing” of the agency, nor does it provide verification that the company complies with the regulations.

According to July 13 court documents from the pre-petition hearing of the SEC case against Coinbase, the SEC claimed that it did not approve of Coinbase’s business structure when it gave it the green light to become public in April 2021.

“Your Honor, I will say that just because the SEC allows a company to go public does not mean that the SEC blesses the underlying company or the underlying business structure or says that the underlying business structure n is not in violation of the law,” SEC trial attorney Peter Mancuso said, adding that:

“It’s impossible for an S-1 approval to be a blessing to a company’s entire operation. In fact, there is no evidence that the SEC reviewed specific assets and made specific decisions, then reassured Coinbase that it would not later turn out to be a security.

On crypto Twitter, several people, including Gemini co-founder Cameron Winklevoss, pointed to the implications of such statements, as they questioned why the SEC would allow an allegedly non-compliant company to go public in the first place, being given that its purpose is to protect the United States. consumers.

U.S.-based companies are required to submit an S-1 filing to the SEC before they can begin listing their shares on a national stock exchange. As part of the filing, companies must provide a full outline of their business structure and how proceeds from an initial public offering will be used.

Following Mancuso’s comments, U.S. District Judge Katherine Polk Failia said: “Let’s take a break so I can sort of get rid of the skepticism I currently have hearing that answer,” as she continued to raise a few questions.

“I’m not saying the commission should be all-knowing when it assesses a registration statement and should know everything,” she said, adding:

“But I would have thought the commission was being diligent in what Coinbase was doing, and somehow I thought they would say, you know, you really shouldn’t be doing this. This violates securities laws, or we’re sort of in some interesting uncharted territory here in terms of whether your platform assets are securities, so be warned that one day, there might be a problem.

In response, Mancuso ultimately reiterated the SEC’s argument that S-1 filings are more focused on approving company disclosures, rather than the agency itself approving a statement. commercial structure via an endorsement.

Judge Failia then asked Mancuso if the SEC couldn’t have told Coinbase, “Hey, you need to register as a stock exchange. “”

“It was within the power of the SEC to do that, wasn’t it?” she asked.

“I can’t really talk about it,” Mancuso replied.

Related: It’s time for the SEC to settle with Coinbase and Ripple

The SEC initially charged Coinbase for alleged unregistered securities offerings dating back to 2019.

Coinbase is pushing for a quick dismissal of the case on several grounds, with one of its arguments being that the SEC is charging the company despite its business structure and planned activities being “fully described” to the agency beforehand. the Coinbase IPO.

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