John Reed Stark, the former chief of the U.S. Securities and Exchange Commission's (SEC) Office of Internet Enforcement, has recently clarified in a tweet how the Commission's approval of Coinbase's IPO does not amount to an endorsement of their crypto exchange. According to Stark, the SEC only approved Coinbase's registration statement in order to ensure that appropriate disclosures were made as part of their application, and did not sanction their business activities.
The former SEC enforcer further pointed out that Coinbase surely knew this all along, given the presence of a 'No Approval Clause' in the company's prospectus which warned prospective investors that regulators, including the SEC, had neither approved nor disapproved of the securities being offered. This clause was a requirement put in place to inform potential investors that the Commission had not given its approval or approval of the transactions.
Speaking of which, Coinbase's own Form S1 Registration Statement under the Securities Act of 1933 disclosed that there is indeed a high level of regulatory uncertainty present in the status of their activities, and potential civil, criminal, and administrative fines, penalties, orders and actions as a result. Stark concluded this statement with a warning that should the SEC's enforcement case against Coinbase win out, the latter's executives could face jail time.
It is clear from John Reed Stark’s remarks that the SEC did not endorse the crypto exchange Coinbase when approving the company’s IPO in April 2021. On the contrary, the approval process was done to ascertain that Coinbase had made proper disclosures in their application and the intention of the ‘No Approval Clause’ in the company's prospectus was to inform prospective investors that there was no regulatory approval of the securities being offered. Furthermore, Coinbase's own Form S1 Registration Statement revealed that their activities may attract a litany of fines and punishments in the form of civil, criminal and administrative action. It is important to remember this when considering the potential legal ramifications of investing in cryptocurrencies.
Adele Foster
- 2023-05-05
SEC Clarifies Coinbase IPO Approval Does Not Equal Endorsement
John Reed Stark, former chief of the U.S. Securities and Exchange Commission's Office of Internet Enforcement clarified that the SEC's approval of Coinbase's IPO does not amount to an endorsement of their crypto exchange. Read on to find out more.
