Coinbase’s CLO Dismisses $25M Unlawful Political Donation Charges

Coinbase’s Chief Legal Officer (CLO), Paul Grewal, has dismissed claims, suggesting that the exchange was involved in an illegal transaction. For context, rumors have emerged that Coinbase triggered a $25 million transaction in political donations to Fairshake, a super political action committee PAC.

The above allegation implies that Coinbase might face legal sanctions that could negatively impact the exchange. The reason stems from the fact that the action allegedly aiming to support crypto-friendly political candidates was against federal laws.

Coinbas's Alleged Defaultment

According to Moll White, a notable crypto critic, Coinbase’s $25 million transaction, dated May 30, 2024, came within the prohibited period per federal laws.

Earlier this year, on March 4, 2024, the U.S. Marshals Service (USMS) issued a $32.5 million contract. The deal aims to identify a provider that could manage and dispose of significant portions of crypto assets. Noteworthily, bidding for the contract was deemed due by April 1 and July 1, 2024.

Having established the above facts, White argued that Coinbase’s $25 million donation was illegal and must pass strict scrutiny. According to him, the Federal Election Commission (FEC) has mandated federal contractors to desist from political contributions between the period a request for proposals emerges and the period of concluding or ending the contract.

Coinbase’s CLO Reacts

In Coinbase’s defense, Paul Grewal dismissed these allegations, tagging them as “misinformation.” He explained that Coinbase was not a federal contractor under the plain language of 11 CFR 115.1.

Furthermore, Coinbase’s CLO argued that the USMS would not pay the exchange using appropriated funds. Instead, the exchange will utilize the Department of Justice's Asset Forfeiture Fund (AFF).

Additionally, Coinbase’s CLO noted, “This isn't about the Constitution's Appropriations Clause or references to contractors that have nothing to do with political spending. It's about political spending by parties deemed government contractors by relevant rules - 11 CFR 115.1, 28 USC 524©(1), etc."

Crypto Community Reacts

Judging by the comments under Paul’s tweet, it was apparent that most crypto enthusiasts supported his claims. Reacting to Coinbase’s CLO reply, a legal expert with the incognito “MetaLawMan" remarked, “Paul is, of course, correct. Many of us (who previously had nothing to do with politics) have taken a crash course in election law as we engage for the first time in electoral politics to try to advance the cause of financial freedom."

It is left to see how events unfold. However, how the debates turn out will be crucial in ensuring that Coinbase does not enter another round of legal scrutiny. Such situations have proven to be distractions for crypto exchanges' expansion. Hence, Coinbase will likely want to evade similar scenarios.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence before making any trading or investment decisions.

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