Shares of Coinbase dropped nearly 13 percent to $67.33 in
extended trading after the company said on Wednesday that the regulator had
issued it a Wells notice - a formal declaration that SEC staff intend to
recommend an enforcement action.
The potential enforcement actions would be tied to aspects
of Coinbase's spot market as well as its Earn, Prime and Wallet products, the
company said.
The SEC has been ratcheting up efforts to crack down on the
crypto industry since the implosion of FTX last year, and staking services such
as Coinbase's Earn are under increased scrutiny for not being registered.
Staking is a process in which cryptocurrency holders
volunteer to take part in validating transactions on the blockchain. These
products often offer customers eye-popping yields.
Last month, Kraken agreed to shut down its US cryptocurrency
staking service and pay $30 million in penalties to settle SEC charges that it
failed to register the program.
Earlier in the day, the SEC charged Chinese cryptocurrency
entrepreneur Justin Sun with fraud, and accused eight celebrities including
actress Lindsay Lohan with illegally promoting his crypto assets.
Coinbase said its services continued to operate as usual
after the notice was issued.
A Wells notice does not always result in charges or signal
that the recipient has violated any law. © Reuters
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