The SEC Issues Fresh Crypto Warning to Investors
- The SEC issued a Wells Notice to Coinbase on Wednesday informing the company of plans to pursue enforcement action.
- Coinbase informed users that it would suspend Algorand staking rewards on March 29.
- The SEC also filed a lawsuit against Justin Sun, Logan Paul, and a couple of other celebrities for alleged violations related to Tron.
The U.S. Securities and Exchange Commission issued an alert on Thursday warning investors that companies selling securities backed by crypto assets may not be adhering to US laws and are risky. The SEC also cautioned that unregistered offerings of these securities might not include critical information, such as audited financial statements needed for decision-making.
The SEC is aggressively pursuing the crypto industry, which its chair, Gary Gensler, has referred to as a “Wild West” full of dishonest practices. Gensler and other regulators intensified their pursuit of the industry after the collapse of the Bankman-Fried-led FTX in November.
The new alert comes hours after Coinbase said it received a Wells Notice from the SEC. The notice claimed that Coinbase’s staking products are unregistered securities and also highlighted “aspects of Coinbase’s exchange… and Coinbase Wallet.”
Sources within Coinbase expressed confidence that the exchange will defend its stance in court. The leadership at Coinbase, according to the source, is unhappy that the SEC permitted US investors to invest in cryptocurrencies for years before pulling the “rug out.”
Coinbase recently submitted a letter to the SEC asking for clarity on staking. Coinbase chief legal officer Paul Grewal said he was surprised the SEC had struck a $30 million settlement with Kraken regarding its staking service.
Until this settlement, the Commission had not conveyed that it might consider staking services to constitute an investment contract and therefore a securities offering requiring registration with the SEC. And the SEC had not previously made this position known despite ample opportunity to engage the crypto industry and its participants with its concerns.
The SEC informed Coinbase on Wednesday that it would take enforcement action against the exchange. Reacting to the news, Grewal claimed the notice “does not provide a lot of information for us to respond to.” He added that “the SEC staff told us they have identified potential violations of securities law, but little more.”
Coinbase also informed its users that it will suspend Algorand staking rewards on March 29. It appears that the exchange and the SEC could be embroiled in a lengthy legal battle.