Coinbase announced that it has received a Wells notice from the US Securities and Exchange Commission (SEC) regarding a portion of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet. It means the SEC may take enforcement action against Coinbase for possible violations of securities laws.
A Wells notice is not a formal charge or lawsuit, but it can lead to one. Coinbase needs to respond to the SEC no later than March 29th whether it intends to rebut the enforcement division's findings that securities laws have likely been violated.
Paul Grewal, CLO of Coinbase, wrote in a blog article,
"Today’s Wells notice does not provide a lot of information for us to respond to. The SEC staff told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so. Today’s Wells notice also comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to."
He also stated that, since the SEC's investigation on Coinbase last summer, the exchange has developed and proposed two different registration models regarding how it could register at the SEC. It spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC's feedback, but got no response. Both parties met more than 30 times over nine months, "but we were doing all of the talking".
Brian Armstrong, CEO of Coinbase, said on his Twitter,
"We are proud to stand up for our customers and the industry in these moments. Going forward, the legal process will provide an open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets."
Following Coinbase's announcement, shares of the company went down over 13% after-hours.
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