Stuart Alderoty, the Chief Legal Officer of Ripple, has responded to the news that the US Securities and Exchange Commission (SEC) has sent a Wells Notice to Coinbase. A Wells Notice is a letter that indicates the SEC’s intention to sue a company or individual for possible securities violations. Alderoty has given his opinion or comments on the matter.
However, When the US Securities and Exchange Commission (SEC) sends a Wells Notice, the recipient can respond to the allegations made by the SEC in the letter. This response is intended to persuade the SEC that no securities violations have occurred.
After receiving a Wells Notice, the SEC has six months to determine whether or not to pursue legal action against the recipient. The receipt of the notice from the SEC was responded to by Coinbase yesterday.
According to a blog post written by Paul Grewal, the Chief Legal Officer of the crypto exchange Coinbase, the Wells Notice received from the SEC needed more details for Coinbase to formulate a response.
The Wells Notice sent to Coinbase by the US Securities and Exchange Commission (SEC) has identified some of the exchange’s tradable assets and its staking service, Coinbase Prime, and self-custody wallet, as potentially violating investor protection laws. However, the notice did not specify which tradable assets were at issue. The notice was the result of an investigation that was conducted by the SEC into Coinbase last year.
Additionally, the SEC has also filed a lawsuit against former Coinbase employee Ishan Wahi for insider trading charges. As part of the lawsuit, the SEC claimed that nine of the assets listed on Coinbase were unregistered securities.
Coinbase has expressed its continued confidence in its asset listing process, despite the allegations made by the SEC in the Wells Notice. According to Paul Grewal’s blog post, Coinbase does not list securities and maintains that its staking program does not constitute an unregistered security offering.
It is worth noting that Coinbase’s rival, Kraken, recently agreed to pay a $30 million fine to settle charges from the SEC and has permanently stopped its staking program for US customers. Coinbase has been arguing against the characterization of its staking program as an unregistered security offering in recent weeks.
Coinbase has emphasized that despite being approved by the SEC to become a publicly traded company in April 2021, the threat of enforcement action still looms. Coinbase noted that the SEC approved its business based on the disclosures now being investigated. The approval came just days before Gary Gensler became the new Chair of the SEC.
The firm also highlighted that it had met with SEC officials 30 times in the past nine months to register a portion of its business and resolve investigations. However, in January, the SEC ended the process, which it had initially suggested after Coinbase claimed to have spent millions in legal fees to suggest suitable registration models, as there are no existing models for crypto under the current regulatory framework.
According to the blog released by Coinbase, Paul Grewal, the Chief Legal Officer, noted that: “The SEC will not let crypto companies “come in and register” – we tried.”
Recent reports have suggested that Coinbase has been gearing up for a potential legal battle with the SEC in recent months. One indication of this was the exchange’s decision to change its risk disclosure, stating that it may choose not to delist a listed crypto asset even if the SEC declares it a security unless there is a court ruling in the regulator’s favor.
Ripple’s Support Could Boost Coinbase’s Case
In a tweet posted in the early hours of today, Stuart Alderoty, the Chief Legal Officer of Ripple, expressed support for Coinbase in response to the Wells Notice issued by the SEC. He quoted the proverb, “The enemy of my enemy is my friend,” suggesting that he sees Coinbase and Ripple as allies against the SEC. Alderoty also retweeted Paul Grewal’s response to the Wells Notice, indicating his agreement with Coinbase’s stance.
Ripple is currently involved in a legal dispute with a regulatory agency over whether XRP, its cryptocurrency, should be classified as an unregistered security offering. Ripple has framed the lawsuit as an attack on the emerging cryptocurrency market. However, Coinbase has supported Ripple by submitting an amicus brief in its favor. The brief is a legal document that provides additional arguments and insights to the court from a third-party perspective.
In a tweet, Bill Hughes, a lawyer at ConSesSys, stated that Coinbase could take FOREVER.
John E. Deaton, the founder of CryptoLaw and an attorney, had previously predicted the outcome of the legal dispute between Ripple and the regulatory agency (SEC) in July. In response to recent developments in the case, Deaton criticized the SEC by calling them a “complete and utter disgrace.” He expressed his anger and sadness towards the agency’s behavior. Deaton’s remarks suggest that he is disappointed and frustrated with how the SEC handled the case.
The future of the emerging cryptocurrency market in the United States is uncertain. After the collapse of Terra and FTX, regulators, particularly the SEC, seem to have intensified their efforts to regulate the industry. On the other hand, market players are requesting clear market guidance. Despite the crackdown, there are still calls for more transparent regulations to help the industry grow healthily and sustainably.