ALBAWABA — The Securities and Exchange Commission on Wednesday issued cryptocurrency exchange Coinbase a Wells Notice that the agency uses to inform companies that they are facing imminent legal action for violating United States securities laws.
The company disclosed the issuance to shareholders in an 8-K filing and in a blog post, titled “We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead”.
“Based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, 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,” the company added.
Coinbase said it does not intend to change its operations in relation to the notice, especially with the lack of specificity from the SEC.
“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. Until then, it’s business as usual,” said Paul Grewal, Coinbase chief legal officer.
“Although we don’t take this development lightly, we are very confident in the way we run our business – the same business we presented to the SEC in order for us to become a public company in 2021,” Grewal said in a blog post.
Coinbase executives, including Brian Armstrong, founder and chief executive officer, have pushed back against what they see as overreaching by the SEC, which has challenged the crypto industry aggressively since the collapse of FTX.
Coinbase shares fell 8.16 percent drop during regular trading hours and tumbled a further 12.69 percent at 6:28p.m. Eastern Daylight Time in extended trading after the news broke on Wednesday.