The largest US crypto asset trading platform has been accused of illegally operating without regulatory approval.

The US Securities and Exchange Commission (SEC) said it had filed a lawsuit against Coinbase.

The action also accuses its Prime and Wallet units of operating as unregistered brokers.

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News of the case prompted a 20% decline in the company’s share price in pre-market deals.

The SEC made the announcement less than 24 hours after it also sued Coinbase rival Binance but on different grounds.

That revelation also prompted a plunge in wider crypto and share values on Monday.

Coinbase was yet to comment.

The collapse in November last year of FTX and the subsequent arrest of its founder, Sam Bankman-Fried, raised the focus of regulators on the sector.

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Coinbase was earlier this year sent a so-called ‘Wells Notice’ by the SEC which is usually an indicator of looming legal action.

Coinbase Prime routes orders to Coinbase’s platform and others while Coinbase Wallet lets investors access liquidity outside Coinbase’s platform.

The SEC claims Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the commission, as required by law.

“While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled.

“Today’s action seeks to hold Coinbase accountable for its choices,” its statement said.

SEC chair Gary Gensler tweeted: “Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection.”

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