Coinbase Responds to SEC's Wells Notice Amid Share Dumping Accusations

On April 27, prominent crypto exchange Coinbase responded to the SEC’s Wells Notice, which was served in late March. The exchange said that enforcement action against the company will pose a risk to the SEC, and “fail on the merits.” The company released a written response, along with a video of CEO Brian Armstrong and chief legal officer Paul Grewal.

Coinbase reiterated that it “does not list, clear, or effect trading in securities.” Furthermore, the company stated that the SEC’s justification “appears to rest on superficial and incorrect analogies to products and services offered by others.”

In its warning to Coinbase, the SEC stated that it would claim the company was issuing and selling unregistered securities, in violation of federal law. Moreover, the SEC warned Coinbase about the risk to its spot trading, staking, custody, and institutional trading businesses. The SEC could force the exchange to shut down those units if they are successful. The exchange has also filed a suit against the commission for the lack of regulatory clarity. Furthermore, Armstrong and Grewal said that they have tried to engage in dialogue with the SEC but have only received “silence” in return.

Are Coinbase execs dumping their stocks?

Apart from its response, the exchange has also filed for a Writ of Mandamus against the SEC. As per Cornell University,

“A (writ of) mandamus is an order from a court to an inferior government official ordering the government official to properly fulfill their official duties or correct an abuse of discretion.”

According to Patrick Tan, CEO of Novum Alpha, a crypto hedge fund, the Mandamus is a distraction for Coinbase execs to dump their shares.

Furthermore, Tan mentioned that the SEC has tried to be clear on its regulations on many occasions. He tweeted, “The SEC has filed countless pages of pleadings and filings related to the over 140 crypto-related enforcement actions.”

Tan added, “Coinbase will almost certainly lose in court. The exchange will head offshore which will put serious questions on its shares and what value they have remaining.”

Tan is not the only one with this opinion. According to a crypto sleuth’s Twitter handle “Bitfinexed“, Armstrong has been dumping shares of the company into retail investors. The data shared by “Bitfinexed” can be found on Dataroma, which has a detailed list of Coinbase shares being sold.

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