Lawyers Cash In on Binance, Coinbase ‘Ultimate Fight’ With SEC

Binance and Coinbase are making lawyers big winners in life-or-death struggles against the US Securities and Exchange Commission, as the crypto companies start spending what will ultimately tally tens of millions of dollars in legal fees.

Fees from the lawsuits the SEC filed last week could stretch from $50 million to $100 million, said Farshad Ghodoosi, an assistant professor of business law at David Nazarian College of Business and Economics at California State University, Northridge.

Binance, its chief executive Changpeng Zhao, and Coinbase have assembled all-star defense teams of former top SEC lawyers who now work at high-powered firms including Sullivan & Cromwell, Wachtell, Lipton, Rosen & Katz, Gibson Dunn, Milbank, Latham & Watkins and WilmerHale.

“They’re hiring the best of the best because it is really the future of centralized exchanges that is on the line in the United States,” said Ghodoosi, who has written about the extent of litigation facing crypto companies. “This is their ultimate fight.”

Bankruptcy lawyers have been some of the biggest winners in the crypto sectors troubles that stretch back for months. Sullivan & Cromwell through April billed more than $80 million in legal fees for its work representing FTX Ltd. in its Chapter 11 proceeding, court documents show. Firms including Quinn Emanuel Urquhart & Sullivan and Paul Hastings also have roles in the case.

Kirkland & Ellis through March billed nearly $60 million for its work representing three bankrupt crypto exchanges—Voyager Digital Holdings Inc., Celsius Network LLC and BlockFi Inc.—according to court documents.

Now legal teams are helping Binance and its chief fight an SEC lawsuit filed June 5 in Washington, alleging that they mishandled customer funds, misled investors and regulators, and broke securities rules.

A day later, the SEC sued Coinbase in federal court in New York, alleging the firm for years broke its rules by letting users trade numerous tokens that were unregistered securities.

“Both companies have been gearing up for this, especially over the past six, eight months,” said Robert Le, senior analyst for PitchBook Data. “The legal resources required for these companies is significant.”

The lawsuits threw a regulatory blanket over $120 billion of crypto tokens the SEC deemed to be unregistered securities. The designation comes with strict investor protection rules and could cause US-based exchanges to drop the tokens.

Binance and Coinbase issued statements denying the claims.

Binance Team

Binance has hired former SEC leaders from big-name defense firms in a sign it is gearing up for a protracted court battle.

The hires include Richard Grime from Gibson, Dunn & Crutcher, who was formerly assistant director of the enforcement division at the SEC. He’s now the co-chair of his firm’s securities enforcement practice.

BAM Trading Services, which operates Binance’s US exchange, hired William McLucas of Wilmer Cutler Pickering Hale and Dorr. McClucas served more than eight years as SEC enforcement director.

Binance.US this week added to its team four lawyers from Milbank, including George Canellos, a former co-director of the SEC’s enforcement division. He was also chief of the major crimes unit at the US Attorney’s Office in the Southern District of New York.

Douglas Yatter, a former top trial lawyer in the US Commodity Futures Trading Commission enforcement division, is representing Binance chief Zhao.

Gibson Dunn and Latham were already representing Binance in a case the CFTC filed in March, accusing the world’s largest crypto exchange of routinely flouting US derivatives rules and breaking the law by failing to register with the agency.

Coinbase Team

Coinbase is prepared to take its case all the way to the US Supreme Court, top company lawyer Paul Grewal told Bloomberg News, as, “the SEC has fundamentally gotten this wrong.”

Coinbase has a team of lawyers from Wachtell on its defense, including William Savitt, Sarah Kathleen Eddy, and Kevin Schwartz.

Savitt, a former clerk for US Supreme Court Justice Ruth Bader Ginsburg, is co-chair of Wachtell’s litigation department. He represented Twitter Inc. in its successful litigation pushing Elon Musk to finalize his $44 billion purchase of the social media company.

Sullivan & Cromwell lawyers are also representing Coinbase. That team includes Steven Peikin, who served as co-director of the SEC’s enforcement division from 2017 to 2020 and now leads the firm’s securities and commodities investigations practice.

Coinbase has a “team of the highest quality,” said Jared Gianatasio, a partner with New York’s Kleinberg Kaplan who advises regulated entities on transactions and trading activity. “They’re willing to fight different interpretative positions of the SEC, like whether certain tokens on the Coinbase exchange are investment contracts. They’re willing to push that pretty far.”

Litigation funders and law firms have discussed bringing private actions on behalf of consumers against exchanges in the wake of the SEC enforcement actions, Ghodoosi, the California State University, Northridge professor, said. Those lawsuits face challenges, including finding deep-pocketed defendants who are within the jurisdiction of US courts, he said.

“There is an opportunity in this area for attorneys who are creative and can find a nexus,” Ghodoosi said. “But for now, the 900-pound gorilla in the room is the SEC’s litigation around whether these are securities.”

— With reporting by Olivia Cohen in Washington.