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Coinbase Challenges SEC’s DeFi Registration Rules

Plus SEC Charges Novatech in $650M Crypto Ponzi Scheme

Author

Nathaniel Whittemore
August 13, 2024

The Breakdown First Five - Tuesday, August 13, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

Coinbase Challenges SEC’s DeFi Registration Rules

5. Free Gambaryan

Binance compliance executive and decorated IRS investigator Tigran Gambrayan has taken a turn for the worse while locked up in Nigeria. Gambrayan has suffered through malaria, pneumonia, throat infections that require surgery and now a herniated disc. His family says he is now “wheelchair-bound due to a treatable condition that has not been properly addressed.” Lawmakers recently visited Nigeria to negotiate his release but came home empty handed. 

4. Marathon Goes Microstrategy

Marathon Digital are taking a page out of the Microstrategy playbook and issuing $250M worth of convertible notes to buy more Bitcoin. The largest publicly listed miner in the world had already bought $100M worth last month as well as retaining all mining rewards as part of their “full HODL” strategy. As Marathon pushes on the gas, the recent downturn has put weaker miners in a precarious position with profitability on a razors edge.

3. Grayscale Stems the Bleeding

Grayscale’s Ethereum ETF has recorded its first day of zero net outflows. The product has seen almost 25% of AUM run out the door over its first 14 trading days, a much faster pace than GBTC. However, it took GBTC four months and 50% outflows to register its first zero day. 

2. SEC Sues Novatech

The SEC has filed fraud charges against $650M ponzi scheme Novatech. The scheme used the illusion of managed crypto and forex trading to lure 200,000 victims worldwide, largely from minority church groups. Following the NYAG lawsuit filed in June, the SEC has added six promoters to the list of defendants, suggesting they are just as culpable.  

1. Coinbase Objects to DeFi Rules

Coinbase has renewed their objection to the SEC’s DeFi registration rules. This proposal would require decentralized exchanges to register and follow compliance standards as an alternative trading venue. It is now on its fourth comment period, with hundreds of letters against the rule. Coinbase believes the rule is “irrational” and exceeds the SEC’s jurisdiction in a post-Chevron world. They suggest the SEC start over and conduct a proper cost-benefit analysis.