In the most hard hitting shakedowns yet on firms within the crypto industry, the Securities and Exchange Commission filed yet another lawsuit against one large crypto exchanged and requested that a federal court to freeze the assets of another. The lawsuit against Coinbase marked the fourth major instigated power move to mark a new trend in litigation against the industry’s biggest players in DeFi. The first being Sam Bankman-Fried’s FTX last year. Kraken was next when they broke the agency’s rules by offering a service that allowed investors to earn rewards by ‘staking’ their coins. The third suit is brought against Binance for similar reasons. Staking-as-a-service is when an investor pays to validate transactions on the blockchain for profit. Proof of stake cuts down on the energy used previously by the ‘proof of work’ system.

This legal inquiry is poised to reveal how these firms operate, hitting home the causes and conditions leading to some of the staggering growth we’ve seen in the press followed by major losses and even malfeasance.

Hours after announcing the Coinbase lawsuit, the SEC asked a federal court to issue a temporary restraining order to freeze assets held by the U.S. arm of Binance, the world’s most popular crypto exchange. That request came the day after the SEC sued Binance, accusing it of violating securities laws and making false statements to investors.

Binance has a U.S. unit that operates separately from its international activities. The Commodity Futures Trading Commission, earlier this year accused Binance of helping U.S. customers use its offshore site by advising them on the use of virtual private networks. Binance operates internationally as Binance.com and in the U.S. as Binance.US. Users based in the U.S. are barred from using Binance.com, and the SEC alleges that Binance securities laws by allowing U.S. customers to trade on Binance.com despite the ban.

Yesterday morning, the U.S. Securities and Exchange Commission (SEC) unveiled charges against crypto exchange Coinbase. They arrived just one day after the SEC filed charges against Binance and its founder, Changpeng Zhao.

The SEC has also indicated that Binance and Binance.US mixed billions of dollars worth of funds—similar to activities that helped to bring down FTX—and sent them to a European company controlled by Zhao.

In one instance, Binance’s chief compliance officer even messaged a colleague to say that, “[we] are operating as a (vulgarity) unlicensed securities exchange in the USA bro.”

Binance Suit:

• Binance.com and Binance.US are operating as unregistered exchanges and clearing agencies.

• Binance.com is operating as an unlicensed broker.

• The exchanges are making unregistered offers and sales of BNB and BUSD, via crypto lending and staking-as-a-service programs.

• They are failing to restrict, and in some cases even encouraging, U.S. users from using Binance.com rather than Binance.US.

• They are misleading Binance.US customers about market surveillance controls to prevent manipulative trading on Binance.US.

Coinbase Suit

• Coinbase has allegedly earned billions by allowing for the unlicensed buying and selling of ‘crypto asset securities,’ particularly through its staking-as-a-service program, which the SEC charges Coinbase chose deliberately not to register, putting investors at risk.

“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement said in an SEC press release.