- The SEC issued a Wells notice to crypto exchange Coinbase, warning the exchange that it had identified potential violations of U.S. securities laws.
- Coinbase said the warning would mean no changes to the exchange’s current products or services.
- The notice marks the second SEC warning to a crypto company, following a February notice to stablecoin issuer Paxos.
In this illustration the Coinbase logo viewed on a smartphone screen.
Rafael Henrique | SOPA images | Light Rocket | Getty Images
The Securities and Exchange Commission has issued a Wells notice to crypto exchange Coinbase, warning the company that it has identified potential violations of US securities laws.
“Based on discussions with employees, the company believes that these potential enforcement actions would relate to aspects of the company’s spot market, the staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet,” Coinbase said in a regulatory filing. “The potential civil action may seek injunctive relief, disgorgement and civil penalties.”
A notice from Wells is typically one of the last steps before the SEC formally files charges. It generally sets the framework for the regulatory argument and provides potential defendants with an opportunity to refute the SEC’s claims.
Coinbase described the investigation as “shallow” and said Wells’ notice contained relatively little information about possible breaches.
The company said that pending the resolution of any legal cases, the exchange’s offerings would continue as normal.
Coinbase executives, including founder and CEO Brian Armstrong, have lashed out at perceived hype by the SEC, which has aggressively cracked down on the crypto industry since FTX collapsed in November. At the direction of SEC Chairman Gary Gensler, the regulator has issued enforcement actions against several heavyweights, including Gemini, Genesis, TRON executive Justin Sun, Do Kwon, and crypto exchange Kraken.
“We are prepared for this disappointing outcome and confident in the legality of our assets and services,” Paul Grewal, Coinbase’s chief legal officer, said in a statement to CNBC. “If necessary, we welcome a court hearing to provide the clarity we have advocated and demonstrate that the SEC simply was not fair or reasonable in its commitment to digital assets.”
The SEC sent a notice from Wells to stablecoin issuer Paxos in February. “We will be working with SEC officials on this matter and stand ready to pursue vigorous action if necessary,” a Paxos spokesman told CNBC at the time.