The US Securities and Exchange Commission has shifted its target to Coinbase while still in a long-running legal tussle with Ripple. According to the recent report, the exchange received a Wells notice from the SEC, suggesting a looming lawsuit for securities law violation.
Meanwhile, Stuart Aldorety, lead counsel to Ripple, tweeted his opinion of the SEC’s Wells notice to Coinbase.
SEC Brooding A Lawsuit On Coinbase After Wells Notice?
On March 22, Coinbase confirmed receipt of a Wells Notice from the SEC, alleging the crypto exchange violated securities law. The Wells Notice is a letter expressing the commission’s suspicion regarding Coinbase’s violations. Typically, the notice should allow the recipient to respond to the claims convincing the watchdog otherwise.
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However, a blog post by Coinbase’s lead legal officer, Paul Grewal, reveals that the Wells Notice presented scarce information for the exchange to respond. The letter touted that some unspecified tradable assets on Coinbase’s staking services, Coinbase Prime, and self-custody wallet are against investor protection law.
According to the SEC, the notice is the sequel to its previous investigation last year. That was when the regulator claimed that nine assets listed on Coinbase were unregistered securities in a lawsuit against a former employee of the crypto exchange.
However, Grewal noted that Coinbase keeps its assets listing process confidential and insists that it does not list securities. Similarly, the crypto exchange has frequently emphasized that its staking platform does not offer unregistered security offerings.
Amid the fiasco, Stuart Alderoty’s reaction hints that Ripple might support the crypto exchange. In his tweet, the lawyer quoted an old saying: “the enemy of my enemy is my friend.” However, Ripple remains focused on its ongoing lawsuit with the SEC over the status of XRP as a security offering.
Ready To Fight SEC In Court
Responding to the SEC’s recent move, Coinbase highlighted that the regulator threatens enforcement action after approving its business in 2021 based on the disclosures. That was a few days after SEC’s current chief Gary Gensler assumed the position of chairman.
Coinbase also said it met SEC officials 30 times over the past nine months while trying to register part of its business and resolve investigations. But the watchdog ended the process in January after Coinbase supposedly spent millions in legal fees to suggest befitting registration models since none currently exist for crypto.
According to Grewal, the SEC frustrates crypto companies who tried to register as it did to Coinbase. The crypto exchange appears prepared for a fight with the SEC following recent developments. The cryptocurrency exchange also adjusted its risk disclosures.
The risk disclosures suggest that it may insist on not removing a listed digital asset even if the regulator touts it as a security unless the court rules otherwise. The exchange’s CEO’s tweet thread yesterday also aligns with this assumption.
previously, the SEC made the same move against crypto exchange Kraken, leading the firm to agree to a permanent suspension of its staking services to US customers. Kraken also had to pay a fine of $30 million to settle the SEC from pressing further charges.
Featured image from CNBC and chart from Tradingview.com
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