Coinbase CEO Brian Armstrong has come under scrutiny after selling almost 30,000 shares of his company, worth more than $1.7 million, just two days before the Securities and Exchange Commission (SEC) took enforcement action against Coinbase. Investors and industry experts have expressed concerns about the timing of the sale, which took place shortly before Coinbase’s share price plunged by 30% from $63 to $44.
There has been speculation that Armstrong’s sale was a pre-planned transaction, executed prior to the SEC’s enforcement action, and not related to insider trading or a planned sale by the company’s executives. However, some investors remain skeptical and are questioning the optics of the sale.
Publicly-traded companies like Coinbase are subject to strict rules governing when and how executives can trade their company’s stock. In general, they must create a trading plan that allows them to plan the sale of their shares well in advance, even if they do not have insider information. The details of the plan, including the number of shares to be sold and when, must be established and strictly adhered to in advance.
If Armstrong’s sale was in compliance with his plan, the timing of the sale would have been coincidental with the SEC’s complaint announcement. Nevertheless, some investors continue to have concerns about the appearance of the sale and the possibility of insider trading.
However, companies are generally subject to disclosure requirements that compel them to inform the public about significant events as soon as possible. The announcement of the SEC’s complaint likely followed these rules, and it is possible that the news coincided with Armstrong’s pre-planned sale.
The ongoing SEC v. Ripple case is expected to have far-reaching implications for the cryptocurrency industry, particularly for companies like Coinbase and Binance. According to cryptocurrency-friendly attorney James Murphy, a decision in favor of Ripple by Judge Torres could undermine the SEC’s case against Coinbase and Binance.
Murphy believes that if Judge Torres decides that XRP tokens traded on secondary markets are not securities, this could weaken the SEC’s argument that Coinbase operates an unregistered securities exchange, broker-dealer, and clearing broker. The SEC claims that 13 tokens traded on Coinbase are securities. However, if these tokens are not considered securities, the SEC’s case would fail.
While a decision by Judge Torres in other cases would not set a binding precedent, Judge Rearden, who is presiding over the Coinbase case, is a new judge and works at the same court in Lower Manhattan as Judge Torres. Murphy anticipates that Judge Rearden will closely consider Judge Torres’s legal arguments when deciding whether XRP is a security and could follow this reasoning when analyzing whether the 13 tokens mentioned in the Coinbase complaint are securities.
If Judge Torres, however, decides that XRP tokens are securities, the SEC could use this decision to argue that the judges overseeing the Coinbase and Binance cases should follow Judge Torres’s reasoning.
Coinbase’s share price has recently reclaimed the $50 level on the one-day chart.