By Hannah Lang, Manya Saini and Niket Nishant

(Reuters) -Coinbase Chief Executive Brian Armstrong on Wednesday hit back at U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler over the agency's lawsuit against the crypto exchange, calling him an "outlier," while also reassuring customers that their funds were safe.

The SEC on Tuesday alleged Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon. The agency also said Coinbase was operating as an unregistered exchange, broker and clearinghouse.

Armstrong, an outspoken critic of the SEC who has led a push in Washington for clearer crypto rules, said at a Bloomberg conference that the company had approached the regulator about becoming registered, but received an "icy reception" from Gensler at their first meeting.

Gensler has long said most tokens constitute securities and has steadily asserted the SEC's authority over the crypto market. U.S. President's Working Group on Financial Markets has also said some coins linked to fiat currencies may be securities.

Crypto companies, including Coinbase, dispute that crypto tokens are securities and have repeatedly called for the SEC to create clear rules.

"The SEC chair is really an outlier,” Armstrong said, adding that several lawmakers he had talked to were supportive of developing a clear regulatory framework for the technology.

Coinbase shares rebounded on Wednesday to rise nearly 3.1% to $53.2.

A spokesman for the SEC declined to comment.

The SEC on Monday sued Binance, the world's largest cryptocurrency exchange, likewise accusing it of selling cryptocurrency products without registering them as securities. It also alleged Binance artificially inflated trading volumes, diverted customer funds and failed to restrict U.S. customers from its platform.

Armstrong was quick to draw distinctions between the two cases, which he told CNBC "could not be more different."

"In Coinbase’s case, for instance, there hasn’t been any allegation of misappropriation of customer funds," he added.

Speaking to Reuters late on Tuesday, Paul Grewal, the company's chief legal officer, also said he was "confident" the SEC would not try to freeze Coinbase's assets, as it has done in the case of Binance. "The standards that are required for such an asset seizure simply don't apply in our case," he said.

Binance did not immediately respond to a request for comment. In a statement on Monday, Binance pledged to vigorously defend itself against the lawsuit, which it said reflected the SEC's "misguided and conscious refusal" to provide clarity to the crypto industry.

SETTLEMENT BREAKDOWN

It was not the first time Armstrong, who co-founded Coinbase in 2012 after a stint as a software engineer at Airbnb, has taken aim at the SEC. In 2021, he accused the agency in a series of tweets of "really sketchy behavior" after it warned Coinbase it would sue the company if it went ahead with a planned lending program. Coinbase subsequently spiked the product.

Last July, Coinbase disclosed an SEC probe into its asset listing processes, staking programs and yield-generating products. In the first quarter of this year, Coinbase lawyers had been discussing a potential settlement with the SEC that would involve the company paying a penalty, and provide a path to registering with the agency, a source with knowledge of the discussions said.

But those talks broke down in March when the SEC made its position clear that fundamental aspects of the firm's business model were essentially illegal, the source said. Coinbase received a notice from the SEC that it planned to bring an enforcement action against the company the same month.

Coinbase has been pushing the SEC to formulate new crypto-specific regulations since last year and in April asked the U.S. Court of Appeals for the Third Circuit to compel the regulator to respond. That court on Tuesday ordered the SEC to provide a response within a week.

Grewal said despite the lawsuit, Coinbase would still be interested in a dialogue with the SEC about how to bring cryptocurrency into the regulatory perimeter.

"If there were an opportunity for a real conversation, of course we would take it up, but I want to be very clear: Coinbase is absolutely committed to defending itself in court," he said.

(Reporting by Hannah Lang in Washington and Manya Saini and Niket Nishant in Bengaluru; Additional reporting by Chris Prentice; Editing by Shounak Dasgupta, Michelle Price and Diane Craft)