Coinbase shares tumble 8% after SEC says it’s considering action

In a regulatory filing Wednesday, Coinbase Global COIN received a Wells notice from the Securities and Exchange Commission stating that SEC staff had made a preliminary determination to take an enforcement action against the largest U.S. coin exchange for violations of federal securities laws.

After falling just as much Wednesday, the shares of Coinbase fell 8%, 8% in a matter of hours. Since January, the stock has doubled, but it is still down 56% since a year ago. It was closed Wednesday at $77 per share.

In its filing, the company said that it believes that any action relating to specific assets listed on the platform will include aspects of the exchange's spot market, staking service, Prime and wallet services. A potential civil action from the SEC, it added, may seek injunctive relief, disgorgement, and civil penalties. A Wells notice informs a company or individual of the completion of investigations where a regulator has discovered infractions with the law. Those who receive a notice are required to respond within 30 days with a legal brief.

Coinbase did not respond to a request for comment, but released a blog post at the time it became available stating the company is prepared to fight.

In the blog post, Paul Grewal said that we are confident in the legality of our assets and services and that we welcome a legal process to show that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.

The filing follows a series of SEC enforcement actions and several Wells notices sent to crypto firms in recent weeks. The SEC has taken 11 enforcement actions against firms, including one from earlier Wednesday against the entrepreneur Justin Sun, since the beginning of January.

The SEC settled charges against the second largest exchange, Kraken, for offering the sale of unregistered securities through its staking program. It has told Yahoo Finance that it would fight any action against the service, because of the fact that it has a staking program with terms that differ from the Kraken program.

SEC Chair Gary Gensler has called for exchanges to register with the agency, but Coinbase chief policy officer Faryar Shirzad told Yahoo Finance last Friday that there is no way to do so.