Crypto exchange issued by the Securities and Exchange Commission coin base The Wells Notice alerted the company to the identification of potential violations of US securities laws.
Coinbase shares fell nearly 12% in extended trading after the news broke on Wednesday, dropping 8.16% during normal trading hours.
“Based on discussions with staff, we believe these potential enforcement actions relate to the Coinbase Earn, Coinbase Prime, and Coinbase Wallet aspects of our spot market and staking services,” Coinbase said. said in a regulatory filing. “Potential civil lawsuits may seek injunctive relief, revocation, and civil penalties.”
The SEC has stepped up its crackdown on the cryptocurrency industry, putting pressure on companies and projects that regulators claim are selling unregistered securities. In mid-2022, Coinbase first reported his SEC investigation.
Months before FTX’s collapse in November, crypto markets were rocked by rising interest rates and de-risking, leading to the collapse of stablecoin Terra, crypto hedge fund Three Arrows Capital and exchange Celsius. Voyager went bankrupt.
A Wells Notice is usually one of the final steps before the SEC officially issues a claim. It generally presents a framework for the regulatory debate and offers the potential accuser an opportunity to refute her SEC allegations.
Coinbase described the investigation as “poor” and said Wells’ notice provided relatively little information about potential breaches.
Coinbase Chief Legal Officer Paul Grewal said: “We don’t take this development lightly, but we are very excited about the way we operate the same business that we filed with the SEC to become a publicly traded company in 2021. I am confident,” he said. Said in a blog post.
The company said its exchange offerings will continue as normal until legal proceedings are resolved.
Coinbase executives, including founder and CEO Brian Armstrong, have spoken out against what is perceived as overreach by the SEC, which has been aggressive against the crypto industry since the demise of FTX. At the direction of SEC Chairman Gary Gensler, regulators have issued enforcement actions against several heavyweights including Gemini, Genesis, TRON executives Justin Sun, Do Kwon, and cryptocurrency exchange Kraken.
“We are prepared for this disappointing outcome and are confident in the legality of our assets and services,” Grewal said in a statement. We welcome legal proceedings to demonstrate that the SEC was not fair or reasonable with respect to our involvement in digital assets.”
The SEC sent a Wells Notice to stablecoin issuer Paxos in February. A Paxos spokesperson told CNBC at the time, “He is working with SEC staff on this matter and is willing to pursue litigation if necessary.”
Grewal said Coinbase wants clearer regulation.
“If you give me the rules, I will follow them,” he said. “Give me the actual path to register. I will register the part of the business that requires registration.”
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