Dan Gambardello, the founder of Crypto Capital Venture, a recruiting firm for crypto startups, has critiqued the U.S. Securities and Exchange Commission (SEC) for its inconsistent arguments during court hearings against leading crypto exchanges Binance and Coinbase. The SEC sued both companies last year, alleging that they were operating as unregistered securities exchanges.
"Between the Coinbase & Binance hearings, here is what the SEC is basically saying: 'The token itself is not the security, rather the token itself is the security.' Yes, it doesn't make any sense," Gambardello said. "This is kind of like when a liar gets caught between lies."
Scott Johnsson, a partner at Van Buren Capital specializing in digital assets, also pointed out that the SEC gave conflicting statements about the existence of "investment contracts" in digital tokens during the Binance and Coinbase hearings.
On January 22nd, Binance—the world's largest crypto exchange—and the SEC met at a court hearing where Binance sought to have the SEC's lawsuit against it dismissed. Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia questioned both parties about whether digital assets traded on Binance's platform meet securities' definition per Howey test criteria. She referenced criticism aimed at the SEC for not providing clear enough guidance to the crypto industry. The SEC also met with Coinbase in court last week.
Last year, Investor Choice Advocates Network (ICAN), a nonprofit public interest litigation organization, filed an amicus brief requesting that the court dismisses the SEC's lawsuit against Binance. According to Globe Banner's copy of this brief, ICAN cited an "ambiguous" application of securities laws by the SEC as grounds for dismissal. They accused the SEC of attempting to regulate digital asset industry through "piecemeal litigation," instead of using Congressionally granted authority or official rulemaking.
In November, Binance reached a settlement with multiple other U.S. government agencies, which the SEC did not participate in, as reported by CNBC. As part of this settlement, Binance agreed to pay $4.3 billion in fines. Its founder Changpeng Zhao (CZ) also agreed to step down from his position as CEO and pleaded guilty to failing to maintain effective anti-money laundering standards. His sentencing is scheduled for February 23rd.
In a post dated November 21st, CZ stated that stepping down from the role of CEO was "the right thing to do." He clarified that the U.S. government did not allege misuse of customer funds or market manipulation in the settlement. However, he acknowledged that he "made mistakes" and "must take responsibility."
