The Securities and Exchange Commission (SEC) of the United States has given a Wells notice to Coinbase Global Inc (COIN.O), threatening the cryptocurrency exchange with legal action over some of its goods. Following the news, Coinbase shares dropped nearly 13% to $67.33 in prolonged trading.
The potential enforcement actions relate to Coinbase's spot market, as well as its Earn, Prime, and Wallet products. Coinbase said its services would continue to operate as usual while the matter was being addressed.
A Wells notice is a formal declaration that SEC staff intend to recommend an enforcement action, but it does not always result in charges or signal that the recipient has violated any law.
Staking Services Under Scrutiny
The SEC has been increasing its efforts to regulate the crypto industry since the collapse of FTX last year. Staking services such as Coinbase's Earn are under heightened scrutiny for not being registered.
Staking is a process whereby cryptocurrency holders volunteer to validate transactions on the blockchain, and these products often offer high yields to customers. Last month, Kraken agreed to pay $30 million in penalties and shut down its U.S. cryptocurrency staking service to settle SEC charges that it failed to register the program.
The potential enforcement action against Coinbase may be linked to its unregistered staking service.
SEC charges Chinese cryptocurrency entrepreneur with fraud
In addition to the action against Coinbase, the SEC has charged Chinese cryptocurrency entrepreneur Justin Sun with fraud, and accused eight celebrities, including actress Lindsay Lohan, of illegally promoting his crypto assets.
In association with a $4.6 billion funding campaign for his blockchain platform, TRON, Sun is accused by the SEC of making untrue and deceptive claims about his relationship with tech mogul Jack Ma.
Additionally, Sun is charged with hiding information about his acquisition of the live-streaming service Periscope and misleading investors about the platform's potential income.
The SEC is pursuing specific monetary fines as well as a ban on Sun from serving as an executive or board of a public business.
Conclusion
The SEC's increased focus on regulating the crypto industry continues to affect companies in the sector. Coinbase's receipt of a Wells notice over its products is the latest example of the agency's efforts to ensure compliance with securities laws.
As a reminder, WikiBit is ready to help you search the qualifications and reputation of projects in a bid to protect you from hidden dangers in this risky industry!
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