SEC Sues Coinbase. Which US Stocks Will Benefit?

It came fast and it came furious.

On Mon, 05 June SEC filed a complaint against Binance pressing a total of 13 charges.

  • One of the allegations claims that funds from Binance and Binance.US were commingled into an account controlled by the Changpeng Zhao-associated Merit Peak Limited.

  • Another allegation claims that Binance.US engaged in wash trading through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” which is owned by Zhao.

For more details on Binance lawsuit, click to read my morning post - SEC Sues Binance. Who Wins? Who Loses?. Remember to give a “Like”, “Share” & ”Re-post” ok. Rating is important (to me).

JOKE - Noted by Industry Players

  • Could it be a case of racial discrimination? SBF is caucasian. CP Zhao is asian.

  • Could it be a case of FTX’s political fundings support have its “privileges” ?

  • Whatever the case maybe, SEC chairman Gary Gensler, better have a solid alibi during trial. Otherwise he would ripped to pieces just like the Capital Hill testimonial session.

On Tue, 06 June, SEC followed up with another lawsuit.

This time it targeted $Coinbase Global, Inc.(COIN)$ alleging that:

  • Coinbase has (since at least 2019) made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.

  • Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.

SEC’s lawsuit seeks (a) civil fines, (b) the recouping of ill-gotten gains and (c) injunctive relief.

While awaiting a trial date, Coinbase's general counsel, Paul Grewal said in a statement “The company will continue operating as usual and has "demonstrated commitment to compliance."

Binance and Coinbase dominance in Crypto-market

It is plain to see why SEC Gary Gensler decided to go after the “big boys” of the crypto-world (see above diagram).

Between Binance and Coinbase, they “account” for up to 60% of crypto transactions for May 2023 alone.

Only question remains is whether SEC has sufficient “air-tight” evidence to prove SEC’s argument? One “wrong” move and Mr Gensler could be shown the door?

Stocks That May Gain From Lawsuit:

If you look sufficiently hard, you will find that there are other US stocks that offer crypto-related services as well, besides Binance and Coinbase.

It’s just that they are not the “defacto” stocks for all things crypto.

Is their fate about to change with the impending lawsuit filed against Binance and Coinbase?

(1) $MicroStrategy(MSTR)$

Microstrategy - past 5 days performances

  • A software company has invested heavily in Bitcoin and holds about 140,000 BTC (valued at $4.26 Billion) in its balance sheet.

  • If the SEC crackdown leads to a drop in Bitcoin price or liquidity, MicroStrategy could face losses or impairment charges on its crypto assets.

  • On the other hand, if Bitcoin remains resilient or rallies in spite of the regulatory pressure, MicroStrategy could benefit from its exposure and reputation as a crypto-friendly company.

(2) $PayPal(PYPL)$

Paypal past 5 days performances

  • Online payment giant has pivoted to enable its users to (a) buy, (b) sell and (c) hold cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Bitcoin Cash since last year.

  • Had its then-CEO possessed the forward-looking vision to embrace all things crypto early on in its evolution, it would not have been relegated to Tier-2 status for all things crypto.

  • It plans to expand its crypto services to other countries and platforms.

  • PayPal could benefit from the SEC lawsuit if it drives more demand for its regulated and compliant crypto offerings, especially from institutional investors who seek safety and legitimacy.

  • Similarly, PayPal could also suffer if the SEC decides to target other crypto platforms or services that it partners with or relies on.

(3) $ARK Innovation ETF(ARKK)$

ARK funds - past 5 days performances

  • Fund has a significant exposure to Coinbase, as it owns > 8 Million shares of COIN, making it one of its top holdings.

  • Fund also has stakes in other crypto-related companies such as Square, Grayscale Bitcoin Trust and Kraken.

  • Looking at ARKK’s past 5 days prices, it is still on the rise due to overall market’s positive sentiments.

  • SEC lawsuit could hurt ARKK's performance and returns if Coinbase's stock price continues to dip.

  • Perhaps, the chart of ARKK Funds of Coinbase holdings would provide a “clearer” picture (see below).

Just so you know, Ms Cathie Wood is still purchasing Coinbase stocks despite the lawsuit (see below).

Perhaps she doesn’t want to repeat the same “sell-out mistake” like that of Nvidia (Jan 2023)?

Is she spot on this time round?

  • Do you think Coinbase stock price will continue to fall in the coming days?

  • Do you think you will be interested in any of the stocks that may benefit from Coinbase fallout with SEC?

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# 💰 Stocks to watch today?(05 Nov)

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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Comment27

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  • Taurus Pink
    ·2023-06-08
    TOP
    最近發生這些事件 會低一些 說不定等風頭過了 又一切回歸原來的樣子 [开心] [开心] 這只是我的猜測  基本上我也有持有  $Coinbase Global, Inc.(COIN)$
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    • Taurus PinkReplying toJC888
      那我們一起期待等待結果吧 [龇牙] [龇牙] [龇牙] [龇牙]
      2023-06-08
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    • JC888Replying toTaurus Pink
      [OK]
      2023-06-08
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    • JC888
      Hi tks for sharing yr views n reading my posts. Looks like what I thot about the SEC intention in my morning post "SEC sues Binance" are the reasons. There are news reporting as such now... Lol..
      Hope the mkt can weather thru this storm.
      If the war ends, I'm pretty that shld make stk mkt shoot up..
      2023-06-08
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  • nimbly
    ·2023-06-12
    TOP

    the actual growth company is Adyen, but its european massive grower, as for paypal its, revenue i would say is peaked or slowing so this maybe a value trap.

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    • JC888
      Tks for insights and sharing...
      2023-06-12
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  • JohnnyYoung
    ·2023-06-07
    TOP

    Armstrong comes out and blames the SEC. Got to love the strategy lol.

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    • JC888
      Can't wait for the trail against Binance to begin. Should SEC fail in its sue bid, think the Chair will have no choice but to step down...
      2023-06-07
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  • WendyDelia
    ·2023-06-07
    TOP

    Game over for Coinbase ... given the current SEC situation ...

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    • JC888
      Who could replace Coinbase? Robinhood? Mmmmm.....
      2023-06-07
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  • bubblyx
    ·2023-06-13
    TOP

    In Q1 2023 COIN reported total trading volume of $145B. In Q1 2022 COIN reported total trading volume of $309B. From Q1 2022 to Q1 2023 trading volume dropped off by 53%.

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  • JohnMitchell
    ·2023-06-07
    TOP

    SEC is gonna sue a lot of tokens. This is insane!

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    • JC888
       i know right...
      2023-06-07
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    • JC888
      Exactly. Is it a little too late? Or was it becos of the banks collapsed that made them sit up?
      2023-06-07
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  • cheerzy
    ·2023-06-13

    Given that the trading volume drop at COIN was 53% from Q1 2022 to Q1 2023, the trading volume drop from Q2 2022 to Q2 2023 could easily be worse than 68%. Trading volume reported by Coingeko for Q2 for COIN is very low as well.

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  • wigglyz
    ·2023-06-13

    loaded up. Coinbase is the only exchange that is consistently asking the regulators how to do things legally. It is not coinbase fault that regulators don't even know the answer.

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  • JC888
    ·2023-06-07
    Hi, tks for reading my post.
    Pls give a "LIKe", "Share" & "Re-post" ok. Tks!
    Rating is very important to me. Tks!
    Would you consider "Follow me" so that you get first hand read of my Daily new posts? Tks!
    Reply
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  • zinglee
    ·2023-06-13

    Might be time to buy puts, I reckon COIN is going to decay all summer

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  • nimbly
    ·2023-06-13

    Would this be a good stock to buy and hold for about 40 years?

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  • Edd1e
    ·2023-06-08

    Great ariticle, would you like to share it?

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  • renz1991
    ·2023-06-08
    Great ariticle, would you like to share it?
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  • AdamDavis
    ·2023-06-07

    What does the US government want to do? So crazy.

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  • FK1234
    ·2023-06-08
    💪
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  • ApacheFire
    ·2023-06-07

    Yea. 

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    • JC888Replying toApacheFire
      Thanks thanks... Hope u Njoy what u read so far...
      2023-06-07
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    • ApacheFireReplying toJC888
      Already followed?
      2023-06-07
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    • JC888
      Hi, tks for reading my post. Would you consider "Follow me" so that you get first hand read of my Daily new posts? Tks!
      2023-06-07
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