On the week of the Securities Exchange Commission’s 89th birthday, SEC Chairman Gary Gensler went after both Binance and Coinbase with lawsuits. Combined, the exchanges make up over half of the world’s crypto trading volume, and the SEC wants to regulate the hell out of the entire crypto industry, if not destroy it outright. To Gensler, U.S. law already has all the necessary tools to regulate crypto assets and exchanges, and condemns all new legislation that molds new law with the existing policies in place. In this article, we’ll cover some of the dirty details of each lawsuit as far as specific allegations against Binance’s CZ and Coinbase and possible solutions to throw off Gary’s efforts. More importantly, this article is gonna dig into the “who” and speculate the “why”, specifically what Gary’s motives are (or whose motives he’s representing), the repercussions, and (more specifically) who benefits and why. Cui-bono.
Before we get into Gary, let’s do a quick brief on the lawsuits.
WTF Happened?
Both Binance and Coinbase were accused for violating US securities laws by offering unregistered securities and operating as unregistered exchanges. To prevent repeated offenses, the SEC is requiring them to surrender all wrongfully acquired profits and pay hefty monetary penalties. Both cases are similar, but different. Let’s sum up each one individually.
Coinbase
The SEC’s main complaint against Coinbase is mostly that they didn’t porperly register as a securities exchange, and that failure to register left investors without the typical protections like: SEC inspections, record keeping requirements, and safeguards against conflicts of interests.
Even though the SEC claims Coinbase is an unregistered entity, many have criticized the mixed signals and hypocrisy from regulators, especially given the SEC’s approval of Coinbase’s direct listing.
To add more confusion, Coinbase acquired California-based FINRA-registered broker dealer Keystone Capital Corp in 2018, which is registered with the SEC as a regulated broker dealer. Through this purchase, Coinbase obtained licenses that let it register with the government to offer customers more financial services. Keystone can also operate as a registered investment advisor (RIA) and run an alternative trading system (ATS).
Binance
Binance faces the same problems, and then some…including misrepresenting trading controls and oversight on their US platform.
Separate from Coinbase, Binance was specifically accused for mixing and commingling billions in customer funds with a separate trading firm owned and operated by CEO, CZ, and wash trading to obscure and inflate the trading volume on Binance’s US exchange (Binance.US). Some allege CZ was doing this to be his own market maker for the international business.
In a related but separate filing, the SEC requested a temporary freeze on the assets of Binance.US connected entities. This order was based on the SEC’s accusation of Binance’s alleged free movement of client funds that were merged and rerouted to the two trading firms owned/managed by CZ. After 24 hours of the lawsuit’s announcement, fearful news headlines made traders panic-withdraw $800m, essentially causing a bank-run on Binance.US. Binance then announced they were suspending US dollar deposits and that their banking partners are pausing fiat dollar withdraws. So far since the court hearing from Tuesday June 16, the SEC has no evidence of Binance commingling customer funds.
Dead End for Registration
Differences aside, the common thread for both exchanges is their failure to register with the SEC. This process isn’t all it’s made out to be. In fact, in the words of Admiral Ackbar, IT’S A TRAP!
The SEC is going after exchanges for violating the Securities Exchange Act of 1934, meaning they’re operating a securities exchange without being properly registered a securities exchange. Registration requires the separation of three key functions:
The exchange which matches trades between buyers and sellers
The broker dealer who trades on customer’ behalf
The clearing house that keeps electronic records, settles trades, and moves the said securities and money around
In crypto, all three functions are combined, and SEC policies make it impossible for an exchange to separate them in order to register for compliance. Registered security exchanges are the only ones authorized to trade securities, and current SEC regulation prevents crypto currencies (other than Bitcoin obviously) from being registered as securities. Even if tokens meet the definition, they don’t meet the general standards to be registered in the US. So virtually no crypto can be properly registered to be listed and traded legally.
Even if they were registered, existing SEC rules make it impossible for exchanges to register and comply with the securities exchanges regulations because
Only registered broker dealers can trade on exchanges, but current SEC rules prevent them from handling crypto assets
crypto asset trading platforms registered as securities exchanges could no longer provide custody services. Current SEC guidance prevents custody by qualified custodians
The SEC hasn’t provided a way for crypto exchanges to clearly comply with rules
So when Gary goes on TV and says for companies to “come in and get registered”, it’s bait. There’s no clear path or regulation to do so, and is a trap to shut down crypto exchanges for good.
A Biden appointee, Gary Gensler started encouraging exchanges to register with the SEC and argues that most tokens qualify as unregistered securities, and ramped up the rhetoric once FTX collapsed November 2022. Obviously from the above, the process is a dead end. Having no clear regulatory path for crypto exchanges proves Gensler is set to destroy the entire crypto industry (including Bitcoin-only exchanges).
Front Running the Front Runners
On June 2, before Gensler went guns a blazing, a bipartisan bill was drafted by legislators from both the House and Senate set to completely undermine his agenda. House Financial Services Chair Patrick McHenry (R-NC) and Agriculture Committee Chair Glenn Thomspon (R-PA) drop the Digital Asset Market Structure and Investor Protection Act. The bill with comprehensive instructions that aims to clarify registration procedures for crypto exchanges. Also outlined are steps for “progressive decentralization” allowing assets to gradually transition from security to commodity status over time.
The real chink in Gary’s armor from the bill is that it demonstrates an ongoing process of crypto market legislation. This would put Gensler’s expedient efforts of destroying the crypto industry to bed.
Although the bill was written by two Republicans, it’s still bipartisan due to the fact that Senator Cyntha Lummis (R-WY) and Senator Kristen Gillibrand (D-NY) are taking a backseat on their own crypto bill they drafted last year, showing sincere bipartisan interest. The latest update of the bill even gives more support to the requests of Democrats on the Hill. Democrats demanded that the Federal Reserve should be more involved in the cryptocurrency asset definition transition process. This is somewhat unbelievable given the Fed is currently run by a hawkish Jerome Powell (who’s a registered Republican), and Democrats are typically doves on monetary policy.
However, David B. Morris explained exactly how Gensler’s actions are dismantling the US’s fundamental lawmaking process:
This could rise to the level of violating a 1946 law called the Administrative Procedures Act. The APA was crafted, over more than a decade, in an attempt to reconcile the growing administrative state with democratic principles. President Franklin Roosevelt warned at the time that the growth of bureaucratic U.S. agencies "threatens to develop a fourth branch of government for which there is no sanction in the Constitution." Broadly, the goal of the APA is to ensure that agencies like the SEC remain subordinate to democratic lawmaking processes.
This is the type of legislation the industry needs. Given Gensler’s gorilla efforts to destroy it goes to show he’s obviously trying to take care of business before a bipartisan bill from both the House and Senate gets passed. In short, Gary caught wind of this bill coming down the line and so he tried to front run the front runners by blowing his load on suing Coinbase and Binance all in the same week.
The BlackRock ETF
Black Rock has applied for a Bitcoin ETF with the SEC. Many are bullish, others are bearish (and probably should be). The legal-speak in the ETF mentioned what BR does in the event of a hard-fork, making Bitcoiners worried that BR would sell customers BSV or something. I don’t see that happening.
There won’t be a fork. It’s not in BR’s incentive. The ETF is just to manipulate the price of Bitcoin. Just like Gensler has done with his recent lawsuits against Binance, Coinbase, and the entire crypto industry, his MO is: control to destroy.
Trad-Fi and Davos doesn’t hate Bitcoin necessarily, they just wanna control the price and prevent it from becoming an “escape hatch” as Lagarde called it. Gensler, Fink, Chrissy (Lagarde), they’re all Davos globalists that wanna control economies and governments through corporatism and destroy the notion of the nation state.
Rigging the financial plumbing and manipulating commodity prices is how they accomplish that. Only they can’t when the Fed is off the reservation and keeps raising rates/keeps them high, which forces every other nation to follow suit for preserving the credibility they don’t have and preventing capital flight out of their economy (ECB).
Davos et.al understand Bitcoin as the world’s potential supreme collateral asset. Therefore, they want as much of it as possible (after gold of course. I don’t make the rules). That’s what they hope the ETF would help them accomplish.
The ETF is also a way for Gensler to go around a democratic process of passing bipartisan legislation for crypto (the McHenry Thompson bill) from both the house and the senate. If Gensler gives this BlackRock ETF the green light, it confirms he’s just a globalist out to undermine whatever remains of the democratic process and selling out the American system. That’s what he’s done with the law suits going after Binance and Coinbase (which is odd because Coinbase is the custodian of the ETF, but Coinbase was always gonna be the state’s Guinea Pig for crypto so it makes some sense). Regardless, there’s a Deep State move afoot and it goes beyond finance…
Gary The Puppet
Gary is proving to be performing the WEF/Davos bidding of going against the legislative process of a new bill before it passes. Going buck-wild with his lawsuits seems the only desperate way to “control to destroy” the crypto industry as we know it. Allowing Fink and BlackRock a Bitcoin ETF in order to control the price of Bitcoin is an added bonus and tool that helps him accomplish his lofty goals. More importantly, Gensler is undermining whatever is left of democracy in America as we know it.
A final angle on this Gary saga is the speculation of payback after the fall of FTX. Gensler was close with SBF’s family and was somewhat involved with FTX dealings. It’s not outside the realm of possibility that FTX was set up as a front to go after Binance. It was doomed to fail because they knew it might eventually. They were anticipating it, but it was well worth the Ukraine-Democrat Party money laundering operations as well as going after Binance in order to have SBF convince CZ to be under the same regulations FTX was. That way, Binance could fully be under US jurisdiction. That was the catalyst that inspired CZ to dump FTT and commit the final blow to the over-leveraged paper tiger that was FTX.
The lawsuit against Binance may be a final attempt to regulate offshore capital activity beyond Davos’ control and could also be an extra arm of geopolitical weaponry against the BRICS Nations. The majority of Binance’s revenue comes from outside the US. It’s not outside the realm of possibility (and is also rumored) Binance could be a front for the CCP to generate capital and fund BRICS or Belt and Road initiatives. Whatever the case may be, the useful idiot neocons that are serving Davos afe likely under the impression the West is going to World War III with Russia China. Wars always start off with financial battles and this may be the beginning of one.
Time can only tell, and the future is always changing. No matter how many moving parts there are in such political circus like this, the will for survival seems to triumph. When there’s a will, there’s a way, and however obstructed, justice is somehow served.
~ Phil Gibson
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