Coinbase Faces SEC Wells Notice And Potential Securities Charges Alert
Crypto exchange Coinbase has received a Wells Notice from the Securities and Exchange Commission (SEC) warning the company of potential federal security law violations. The notice precedes a possible enforcement action against the exchange.
2/ Two years ago the SEC reviewed our business in detail and approved Coinbase to go public. Our S1 clearly explained our asset listing process and included 57 references to staking. Coinbase runs a rigorous asset review process and has rejected more than 90% of assets that have…
— Brian Armstrong (@brian_armstrong) March 22, 2023
Coinbase Share Drop
Coinbase CEO Brian Armstrong took to Twitter to assert that the company had already undergone a detailed SEC review a couple of years back and was approved to go public. The exchange also runs a rigorous asset review process and has rejected more than 90% of asset applications. Armstrong welcomed the opportunity for Coinbase to go before a court.
However, the Wells Notice caused Coinbase shares to drop in value, with the exchange closing 8.16% lower at $77.14. The notice stemmed from an investigation disclosed in the summer of 2022, which prompted the SEC to ask Coinbase if it would be interested in discussing a potential resolution involving registering some portion of its business with the agency.
Enforcement Investigation
Coinbase agreed and met with the SEC more than 30 times over nine months, but the exchange was the one doing all the talking. The SEC agreed to provide feedback on the proposals in January 2023, but on the day before the scheduled meeting, it dismissed Coinbase and said it would shift back to an enforcement investigation.
The investigation is currently at an early stage, with Coinbase producing documents and providing two witnesses for testimony. In a blog post, Coinbase’s Chief Legal Officer, Paul Grewal, said the company did not take the development lightly but was confident in the way it runs its business.
The SEC’s investigation is part of a wider move to regulate the crypto industry, which is currently seen as largely unregulated. The agency has recently brought several enforcement actions against crypto firms, including Ripple Labs and Kik Interactive, for securities law violations.
