Coinbase Global Inc., which pledged Thursday to “exhaust all avenues” in countering the SEC, is staffing up legally with an ex-Trump Cabinet member and two former federal enforcers.
Coinbase’s outside legal team includes former US Labor Secretary Eugene Scalia, who is a Gibson Dunn partner, and two former enforcement directors—Steven Peikin of the Securities and Exchange Commission and James McDonald of the Commodity Futures Trading Commission. Both are Sullivan & Cromwell partners.
The crypto exchange “is coming out of the gates swinging—it’s really because it has the depth of the resources that it can afford,” said Carol Goforth, a University of Arkansas law professor. “If Coinbase did not feel comfortable, it would not have been so public in its response.”
The high-powered legal help, revealed in public disclosures this week, shows Coinbase is pulling out all the legal stops in countering the SEC. The legal positioning aligns with the way some other firms in the crypto industry have bullishly responded to increased SEC scrutiny.
Coinbase on Thursday issued a response to a Wells notice the SEC made last month in signaling plans to bring an enforcement action. The crypto exchange said it will be “a well-resourced adversary that will necessarily be motivated to exhaust all avenues.”
A Sullivan & Cromwell team, including partners Peikin, McDonald and Kathleen McArthur, filed the response on behalf of Coinbase. Each of the three charges clients more than $2,100 per hour, based on filings the firm made as part of its representation of FTX in the collapsed crypto exchange’s bankruptcy.
Coinbase hasn’t disclosed what it is spending, or what it is willing to spend, in legal battles with the SEC. Crypto payments firm Ripple has said it has spent $100 million on Big Law firms in its long-running dispute with the agency over its XRP digital asset.
Sullivan & Cromwell is one of Wall Street’s priciest and best-known law firms. Jay Clayton, the former SEC chair, is of counsel at the firm.
Coinbase spokeswoman Lisa Johnson confirmed Sullivan & Cromwell is the exchange’s outside counsel in the SEC investigation but that she has “nothing to add beyond that.”
Two days before Coinbase made its response to the Wells notice, Gibson Dunn separately filed a lawsuit on the crypto exchange’s behalf. The suit is an attempt to compel the SEC to respond to a rulemaking petition Coinbase filed last year.
Led by Scalia, who served as Labor Secretary from 2019 to 2021, the firm argued to the Third Circuit that the SEC is violating the Administrative Procedure Act by failing to respond within a reasonable time.
Coinbase, whose legal chief, Paul Grewal, is a former magistrate judge and Facebook deputy general counsel, has long lobbied for a clearer regulatory framework while vowing to fight any SEC action brought against it.
Coinbase has said that none of the digital tokens traded on its exchange are securities. SEC chair Gary Gensler has, meanwhile, argued that most digital assets are securities that must be registered before the commission.
The SEC in its Wells notice last month pointed to a range of alleged securities law violations, including claims that Coinbase operates an unregistered exchange, clearing agency and broker.
While Coinbase’s response to the SEC’s Wells notice was designed to dissuade the agency from bringing an enforcement action, the SEC is unlikely to back down at this stage, Goforth said.
Coinbase, the largest crypto exchange in the US by trading volume, has relied on a mix of Big Law firms in recent years in US courts.
In the last three years, firms have made 40 appearances on Coinbase’s behalf, according to Bloomberg Law litigation analytics. DLA Piper and Keker Van Nest & Peters have represented the exchange in more than a quarter of those disputes.
Skadden recently helped win a dismissal in New York federal court of an investor class-action claiming 79 digital assets offered on Coinbase’s platform were unregistered securities. The matter, which was dismissed in February, is now on appeal.
The SEC, besides investigating Coinbase, has ramped up its enforcement of the industry, filing actions against FTX, crypto asset trading platform Bittrex and crypto lenders Genesis and Gemini.
The suits come as the SEC and Ripple await a decision on the agency’s 2020 lawsuit claiming that the firm raised more than $1.3 billion through an unregistered token offering.
Ripple has turned to law firms Debevoise & Plimpton and Cleary Gottlieb Steen & Hamilton, along with former SEC chair Mary Jo White and her former deputy, Andrew Ceresney, for litigation that has now run for more than two years.
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