Coinbase said it was served a Wells Notice by the Securities and Exchange Commission (SEC) for potential violations of securities law.
In a blog post Wednesday, Coinbase Chief Legal Officer Paul Grewal wrote the SEC’s notice related to “an unspecified portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet after a cursory investigation.”
Coinbase, which is publicly traded, operates one of the largest cryptocurrency exchange platforms in the world.
“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 wrote. “We continue to think rulemaking and legislation are better tools for defining the law for our industry than enforcement actions. But, if necessary, we welcome the opportunity for Coinbase and the broader crypto community to get clarity in court.”
The Wells Notice, which typically portends an enforcement action, stems from an SEC investigation into whether Coinbase has unregistered securities on its platform. The company disclosed it was under investigation last year.
The SEC tipped its hand in July regarding its stance on at least nine cryptocurrencies listed on Coinbase’s exchange as part of an insider trading lawsuit against former Coinbase manager Ishan Wahi. Wahi pleaded guilty to two counts of wire fraud in February in connection with the allegations and is currently awaiting sentencing.
In 2021, the SEC sent Coinbase a Wells Notice regarding its crypto lending product Lend. Coinbase later abandoned plans to launch Lend.
In his post, Grewal said, “The bottom line remains: Coinbase does not list securities or offer products to our customers that are securities.” He said Coinbase continues to seek guidance from the SEC on how to remain compliant with federal securities laws.