Choosing June 6 as the day to launch dual, broad lawsuits against BINANCE and COINBASE for securities violations is not lost on those who pay attention to history. That said, the Securities Exchange Commission (SEC) lawsuits are also not much of a surprise. Both Coinbase and Binance had received unofficial and official warnings of pending lawsuits in the wings, especially after the SEC cleared the deck of its Kraken, LBRY and Ripple litigation workload that had been in the way. Now, with much of its office available and having had some practice in the "minor" leagues, the Gensler Team is ready to take a shot at the big leagues and enters the field with a bang, at least they hope to do so.
One of the most immediate legal strategies to take in a financial lawsuit attack is to tie up the opponents resources so they become hobbled and unable to do anything due to a lack of finances. This is clearly the hope with Binance via the SEC's filing for an emergency freeze on Binance's assets within the U.S. It's also very much an extreme approach, which has already signaled that the Gensler team is worried any potential prize at the end of the lawsuit might disappear across the border before they can get to the first motions in court. Some might argue the different treatment is because Binance's CEO (Zhao) is Chinese, but there is a more pragmatic logic at work here. After all, Binance is a crypto platform. Practically all of its assets, aside from fiat holdings, can be moved offshore in a matter of minutes via related computer connections, and the SEC would have no real way to get at it then. They would become "highfalutin" lawyers with their public pants down in that situation.
Coinbase is in a different place altogether, being predominantly a U.S. operation. Ergo, there's no need to freeze their assets right away as everything is stateside. The company was bubbling about moving its operations overseas thanks to the growing aggressive regulation from the Feds, but that's now pretty much a "what if" story for the dinner table. With the official filing, the company and its operations are locked into the U.S. until the lawsuit is completed, typical of evidentiary requirements that come with a federal lawsuit.
The legal arguments are tacking on different arguments as well. Coinbase, again, was no surprise. The focus is on its staking programs, arguing they are security operations that are not registered. With Binance, on the other hand, Gensler's approach is one of arguing orchestrated fraud from intentionally failing to register as a securities operation to running a sham system that was intentionally set up to siphon and steal funds. Strong language.
Most notably, however, is the point of political winds in June 2023. Gensler is not working in a vacuum. He knows the next year brings a major presidential election in the U.S., and Biden is looking like a very weak Democratic candidate. If the Republicans can get their act together with a strong candidate that doesn't look like a junior high rehash of Nazi Germany's crystal night in the Florida South or facing an indictment for federal voter fraud in Georgia, they have a good chance of winning the White House. And that would mean Gensler will be out of a job and his "destroy crypto" program out on the streets. So he can't wait any longer to keep collecting evidence. The suits have to be filed now, and the Gensler team has to make major inroads to lock the Feds into a protracted battle. Gensler knows by the time the suits are over, with resources available to the companies and the appeal process, he probably won't be in office to see the end of it. That's not the point; instead, the strategy is to entrench the Feds so that crypto is once and for all shut down in a war of attrition, which of course works nicely for the banks. Do not be surprised if that's where Gensler ends up with the Washington DC rotating door in his next job as a result.
What people should be paying attention to more is who is not involved in the litigation splash so far. The Department of Justice is noticeably missing. When big cases like what the SEC alleges happen, the DOJ and SEC are usually beating the pulp out of each other to be the first to the press on who is suing the tar out of somebody more than the other. Yet, that's not happening here. Instead, the DOJ has restricted itself to clearcut fraud cases, going after rug pull characters who allegedly stole millions in scam NFT projects as well as Sam Bankman-Fried, also a very easy target for a 30-year sentence in criminal court.
Again, today is clearly the SEC's D-Day, but if Gensler is not careful, this might also turn into his personal Dunkirk, getting thrown right back into the ocean. He's grabbed the crypto legal bull by the horns, and that bull is really pissed off at what looks like a scrawny regulator alone in the bullring and in over his head.
