Coinbase’s market capitalization has risen more than 50% since the SEC lawsuit against the bitcoin exchange was filed. During this period its top executives, including CEO Brian Armstrong, actively reduced their holdings in securities.
On June 6 the Commission accused the company of an unregistered offering of securities in the form of a number of tokens and an unlawful consolidation of three functions — acting as broker, exchange and clearinghouse, which are normally separated in traditional markets. The regulator’s focus also included the staking program Coinbase Earn.
That day the company’s shares fell by 9.1%. At one point the decline in market capitalisation briefly exceeded 13.5%.
On June 29, in its response to the suit, the platform accused the SEC of overreach. According to exchange representatives citing the Howey test, the assets listed in the complaint are not investment contracts and, therefore, cannot be treated as securities.
The company noted that for many years it had complied with regulatory requirements and repeatedly requested direct SEC guidance on the enforcement of federal securities laws with respect to the digital assets industry.
The platform refused to change its business model because of the lawsuit.
By that time, the stock had fully recovered its losses after the SEC’s actions. By the close of trading on July 7, the share price had risen 52.5%, from $51.60 to $78.70. Since the start of the year, the exchange’s market capitalization had risen more than 122%.
The catalyst for the positive momentum could have been news around filings to launch spot Bitcoin-ETF.
On June 30, sources cited by the WSJ said that the SEC returned the filings because they lacked sufficient information regarding the so-called joint surveillance agreement or details of this mechanism. The latter became a key addition to BlackRock’s proposal.
The next day, Bloomberg reported that Invesco, VanEck, 21Shares, WisdomTree and Fidelitysent revised filings to the Commission, taking into account the regulator’s criticisms.
The listed firms included in their proposals a note that they would be supported by the exchange Coinbase in joint surveillance. Against this backdrop, the platform’s shares jumped 12.8%, reaching end-March levels of $80.7.
On July 6, a number of top executives, including Armstrong, sold a total of 88,058 shares for about $6.9 million.
Included in the list were board member Gokul Rajaram (4,580 shares), chief legal officer Paul Grewal (1,818 shares) and chief financial officer Jennifer Jones (7,335 shares). Earlier, the latter reduced her stake by 74,375 shares, earning $5.2 million.
At the time of the SEC’s suit against Coinbase, ARK Invest funds added a total of 419,324 Coinbase shares, worth $21.64 million.