Coinbase (NASDAQ:COIN) unveiled the possibilities of potential regulatory action against it on Wednesday as the US federal securities watchdog issued a so-called Wells notice to the crypto exchange.
In the notice, the Securities and Exchange Commission (SEC) notified that the Nasdaq-listed crypto exchange violated US securities law for offering unregistered securities. As such, the regulator is planning further actions on Coinbase which may include an injunction or a cease and desist.
However, details remain scarce in the record. It is also not clear that the regulator indicates which specific activity of Coinbase violates the laws of the country.
“Based on discussions with staff, the Company believes that these potential enforcement actions would relate to aspects of the Company’s cash market, the Coinbase Earn staking service, Coinbase Prime and Coinbase Wallet,” Coinbase said in a statement. regulatory file. “The potential civil action may seek injunctive relief, reimbursement and civil penalties.”
Wells’ notice is preliminary and only informs the regulator’s findings against a company that could lead to enforcement action. The SEC notice to Coinbase provided the crypto exchange until March 29 to refute the regulator’s findings.
Coinbase executives reacted strongly
Meanwhile, Coinbase Chief Legal Officer Paul Grewal publicly criticized the SEC for being opaque in its actions.
“Today’s Wells notice does not give us much information to respond to. SEC staff told us that they had identified potential securities law violations, but no more. We asked to the SEC specifically to identify assets on our platforms that they believe might be securities, and they have refused to do so,” Grewal wrote in a blog post.
“Today’s Wells notice also comes after Coinbase provided several submissions to the SEC regarding registration over the months, to which the SEC ultimately declined to respond.”
Coinbase CEO Brian Armstrong also lambasted the US federal regulator with a series of tweets. According to Armstrong, “the SEC simply has not been fair, reasonable, or even demonstrated serious purpose when it comes to its engagement on digital assets.”
2/ Two years ago, the SEC reviewed our business in detail and approved the Coinbase IPO. Our S1 clearly explained our asset listing process and included 57 references to staking. Coinbase runs a rigorous asset review process and has rejected over 90% of assets that have…
—Brian Armstrong (@brian_armstrong) March 22, 2023
The SEC’s crackdown on crypto
Industry insiders reported earlier that the SEC was also sending Wells notices to two stablecoin issuers, Circle and Paxos. But none of the companies have confirmed this yet. Meanwhile, Paxos is reportedly under investigation by the New York State Department of Financial Services (NYDFS).
Well Notice:
A well notice is a notification issued by regulators to inform individuals or businesses of completed investigations where infractions have been discovered. It usually takes the form of a letter, which informs recipients of both the general nature of the violations…
—Andrew (@AP_Abacus) February 9, 2023
The notice against Coinbase came the same day the SEC filed lawsuits against Tron founder Justin Sun for engaging in washouts with the Tronix (TRX) token and offering TRX tokens and BitTorrent (BTT), which have been classified as unregistered titles.
The lawsuit also named eight American celebrities for promoting TRX and/or BTT without disclosing that they were paid. These names are actress and singer Lindsay Lohan; social media influencer and professional boxer, Jake Paul; rapper and record producer, DeAndre ‘Soulja Boy’ Way; singer Austin Mahone; rapper and record producer Miles’ Lil Yachty’ McCollum; vocalist Shaffer’ Ne-Yo’ Smith; singer and entrepreneur, Aliaune’ Akon’ Thiam; and adult actress Michele Mason (aka ‘Kendra Lust’).
Coinbase (NASDAQ:COIN) unveiled the possibilities of potential regulatory action against it on Wednesday as the US federal securities watchdog issued a so-called Wells notice to the crypto exchange.
In the notice, the Securities and Exchange Commission (SEC) notified that the Nasdaq-listed crypto exchange violated US securities law for offering unregistered securities. As such, the regulator is planning further actions on Coinbase which may include an injunction or a cease and desist.
However, details remain scarce in the record. It is also not clear that the regulator indicates which specific activity of Coinbase violates the laws of the country.
“Based on discussions with staff, the Company believes that these potential enforcement actions would relate to aspects of the Company’s cash market, the Coinbase Earn staking service, Coinbase Prime and Coinbase Wallet,” Coinbase said in a statement. regulatory file. “The potential civil action may seek injunctive relief, reimbursement and civil penalties.”
Wells’ notice is preliminary and only informs the regulator’s findings against a company that could lead to enforcement action. The SEC notice to Coinbase provided the crypto exchange until March 29 to refute the regulator’s findings.
Coinbase executives reacted strongly
Meanwhile, Coinbase Chief Legal Officer Paul Grewal publicly criticized the SEC for being opaque in its actions.
“Today’s Wells notice does not give us much information to respond to. SEC staff told us that they had identified potential securities law violations, but no more. We asked to the SEC specifically to identify assets on our platforms that they believe might be securities, and they have refused to do so,” Grewal wrote in a blog post.
“Today’s Wells notice also comes after Coinbase provided several submissions to the SEC regarding registration over the months, to which the SEC ultimately declined to respond.”
Coinbase CEO Brian Armstrong also lambasted the US federal regulator with a series of tweets. According to Armstrong, “the SEC simply has not been fair, reasonable, or even demonstrated serious purpose when it comes to its engagement on digital assets.”
2/ Two years ago, the SEC reviewed our business in detail and approved the Coinbase IPO. Our S1 clearly explained our asset listing process and included 57 references to staking. Coinbase runs a rigorous asset review process and has rejected over 90% of assets that have…
—Brian Armstrong (@brian_armstrong) March 22, 2023
The SEC’s crackdown on crypto
Industry insiders reported earlier that the SEC was also sending Wells notices to two stablecoin issuers, Circle and Paxos. But none of the companies have confirmed this yet. Meanwhile, Paxos is reportedly under investigation by the New York State Department of Financial Services (NYDFS).
Well Notice:
A well notice is a notification issued by regulators to inform individuals or businesses of completed investigations where infractions have been discovered. It usually takes the form of a letter, which informs recipients of both the general nature of the violations…
—Andrew (@AP_Abacus) February 9, 2023
The notice against Coinbase came the same day the SEC filed lawsuits against Tron founder Justin Sun for engaging in washouts with the Tronix (TRX) token and offering TRX tokens and BitTorrent (BTT), which have been classified as unregistered titles.
The lawsuit also named eight American celebrities for promoting TRX and/or BTT without disclosing that they were paid. These names are actress and singer Lindsay Lohan; social media influencer and professional boxer, Jake Paul; rapper and record producer, DeAndre ‘Soulja Boy’ Way; singer Austin Mahone; rapper and record producer Miles’ Lil Yachty’ McCollum; vocalist Shaffer’ Ne-Yo’ Smith; singer and entrepreneur, Aliaune’ Akon’ Thiam; and adult actress Michele Mason (aka ‘Kendra Lust’).