Coinbase Global (COIN) said in a regulatory filing Wednesday it received a Wells Notice from the Securities and Exchange Commission (SEC) stating that SEC staff had made a “preliminary determination” to recommend an enforcement action against the largest U.S. crypto exchange for violations of federal securities laws.
Coinbase stock fell nearly 20% at the start of trading Thursday morning after falling 8% Wednesday. Before today’s plunge the stock had more than doubled since the beginning of January but was still down more than 75% since its April 14, 2021 IPO.
Coinbase said in its filing that it “believes” any action relates to specific crypto assets listed on the platform will include aspects of the exchange’s spot market, staking service, Prime and wallet services. A potential civil action from the SEC, it added, “may seek injunctive relief, disgorgement, and civil penalties.”
A Wells notice informs a company or individual of the completion of investigations where a regulator has discovered infractions with the law. Receivers of such a notice are required to respond within 30 days with a legal brief.
Coinbase did not respond to a request for comment but published a blog post at the time its filing became available stating the company is prepared to fight.
“We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets,” Coinbase’s chief legal officer Paul Grewal said in the blog post.
Coinbase’s filing follows a string of SEC enforcement actions and several Wells notices sent to crypto firms in recent weeks. Several involve cases related to the collapse of crypto exchange FTX.
Since the beginning of January, the SEC has made 11 enforcement actions against crypto firms and individuals including one from earlier Wednesday against crypto entrepreneur Justin Sun.
The SEC settled charges against the second largest crypto exchange, Kraken, for offering the sale of unregistered securities through its crypto staking program. Coinbase also has a staking program with terms that differ from the Kraken program, and it has told Yahoo Finance it would fight any action against this service.
SEC Chair Gary Gensler has called for crypto exchanges to register with the agency but Coinbase chief policy officer Faryar Shirzad told Yahoo Finance last Friday there is “just no way” to do so.
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Source: https://finance.yahoo.com/news/coinbase-stock-plunges-possible-sec-legal-action-120938187.html