SEC to take action against Coinbase for violating federal securities laws

The Securities and Exchange Commission SEC has made a preliminary decision to take enforcement action against the largest U.S. criptocurrency exchange for violations of federal securities laws, according to a regulatory filing Wednesday by Coinbase Global COIN.

After falling just as much Wednesday, the stock of Coinbase was down 12% in premarket trading on Thursday morning. Since the beginning of January, the stock has doubled but is still down more than 75% since it's April 14, 2021 IPO.

The platform's filing states that it believes that any action relating to specific assets will include 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. The recipients of a notice are required to respond within 30 days with a legal brief.

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

In a blog post, Paul Grewal, the chief legal officer of Coinbase's chief legal officer, said that they were confident in the legality of their assets and services, and that we welcome a legal process to demonstrate 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 a number of Wells notices sent to crypto firms in recent weeks. The SEC has taken 11 enforcement actions against firms and individuals, 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 cripto exchanges to register with the agency but Coinbase chief policy officer Faryar Shirzad told Yahoo Finance last Friday that there was no way to do so.