I'm guessing there was some moving of the goal posts at play here, by the feds, because the SEC does a huge background check on the operations of your company before you're allowed to be publicly traded, and if they didn't find anything there, I have a hard time believing they were breaking rules as the rules were written at the time.
This does not seem to me to be strictly true, at least operating in the space of payments industries. They go very deep into technical details as far as justifying a company's value. Such that in an open source company that I work for, we had to provide metrics as deep as like popularity and contributor-base growth in the open source ecosystem over time. That does not seem like an accounting review, that seems more background. I have a hard time believing that the SEC would not find a detail like whether or not the exchange was even legally operating in the findings of a review of the company's background.
Of course, this was my first time aiding in the effort for taking a company public, so I'm not exactly a well seasoned veteran and there is a lot that I do not know. But based on what we had to provide to the SEC, I do not believe that it is strictly true that the road to publicly traded is only gated by an accounting review.
Securities law is about disclosure. Registering is about filing disclosures.
This is all about disclosure, nothing at all with business function.
I'm sure there's some math behind calculating certain values for disclosure, super important. The importance of this is because the numbers have to reflect reality for the purposes of proper disclosure.
Disclosure.
If your business is to rob trains, not the SEC's business. So long as you disclose your finances you can sell shares of your train robbing business. The criminal conspiracy charges you'll face will have nothing to do with the SEC and everything to do with your state government or the FBI if you messed with interstate commerce.
Sure. They don't review background. They don't go looking around for crimes. But if you straight up tell them "hey SEC, I'm breaking the law" you expect me to believe that they will actually just ignore it and approve? And that's exactly what Coinbase did in it's S-1, if you believe the theory that the SEC has always considered Coinbase to be an illegal operation.
Like do you really believe that if you filed an S-1 with the SEC that said "we raise money from investors and use the proceeds to pay distributions to previous investors" that the SEC would say "sure, whatever, go ahead and IPO your ponzi scheme. We don't review background." Because I sure don't.
