Brad Garlinghouse, the CEO of blockchain company Ripple, said the SEC’s lawsuits against major crypto exchanges Binance and Coinbase are an attempt to overcompensate for the agency’s failure on crypto exchange FTX.
“If it wasn’t already clear, it should be now – Chair Gensler’s laughable ‘pro-innovation’ stance (as he said today), is exactly the opposite," Garlinghouse said on Twitter. "What this also tells me is that the SEC is throwing lawsuits at the wall and hoping they distract from the agency’s FTX debacle. It’s embarrassing to watch an unelected bureaucrat flail like this to mask the fact that he and his agency don’t have the power that he so desperately craves. No one is fooled.”
The SEC filed lawsuits against both Binance and Coinbase earlier this week, alleging that Coinbase should have registered as an exchange with the SEC and accusing Binance of offering unregistered securities and permitting U.S. customers to use the global Binance platform, rather than restricting them to its U.S.-based platform, Decrypt reported.
Sam Bankman-Fried, the founder and former CEO of crypto exchange FTX, is facing 13 criminal charges related to his misuse of customer funds, which led to the bankruptcy of his exchange. According to ABC News, Bankman-Fried is accused of using customer assets to purchase real estate, make political donations and cover losses at Alameda Research, his hedge fund.
Bankman-Fried donated approximately $40 million during the 2022 election cycle, primarily to Democratic politicians, but also to Republicans, CBS reported. His donations included $27 million to the Protect Our Future PAC, which spent more than $24 million supporting 19 different Democratic candidates for the U.S. House of Representatives.
Coinnounce previously reported that Bankman-Fried had a relationship with SEC Chair Gary Gensler, and members of the public have suggested that this relationship is the reason the SEC failed to notice warning signs of FTX’s mismanagement and impending collapse.
Changpeng Zhao (CZ), the Canadian CEO and founder of Binance, the largest crypto exchange in the world, said on a May 29 episode of the "Bankless" podcast that regulators liked Bankman-Fried, in part because he was young, American and well-educated, so when FTX collapsed and Bankman-Fried was discovered to be a fraud, regulators felt their trust had been betrayed. Consequently, CZ said, regulators are now lashing out at players in the crypto industry, regardless of how eager to comply those players are.
“They missed the bad guy, and now they're punishing all the remaining good guys,” CZ said.
In response to the SEC’s lawsuit, Binance said in a statement that it is “disappointed” with the agency’s decision to pursue litigation instead of participating in a “thoughtful, nuanced approach demanded by this dynamic and complex technology.”
Coinbase CEO Brian Armstrong responded to the SEC’s lawsuit with a tweet criticizing the agency’s “regulation by enforcement” approach to the crypto industry. He also noted that the “SEC reviewed our business and allowed us to become a public company in 2021.”
Ripple is a blockchain-based digital payment protocol that enables fast, low-cost international money transfers, and its CEO, Garlinghouse, is an experienced tech executive known for leading the company's efforts to establish XRP, Ripple's native cryptocurrency, in the global financial system. The SEC sued Ripple over the status of XRP as a security, with a significant court decision expected in the coming weeks, according to Finbold.