To The Moon

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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