March 22 (Reuters) – The U.S. Securities and Exchange Commission (SEC) has threatened to sue Coinbase Global Inc (COIN.O) over certain crypto exchange products, adding to tensions in the largely unregulated sector.
Shares of Coinbase fell nearly 13% to $67.33 in extended trading after the company said Wednesday that the regulator had issued a Wells Notice — a formal announcement that SEC staff intend to recommend enforcement action.
The company said potential enforcement actions will be related to the spot market aspects of Coinbase as well as its Earn, Prime and Wallet products.
The Securities and Exchange Commission (SEC) has been ramping up efforts to crack down on the cryptocurrency industry since the FTX crash last year, and stacking services like Coinbase’s Earn are under increased scrutiny for not being registered.
Staking is a process in which cryptocurrency holders volunteer to participate in the validation of transactions on the blockchain. These products often offer customers amazing returns.
Last month, Kraken agreed to shut down its cryptocurrency hoarding service in the United States and pay $30 million in fines to settle charges from the SEC that failed to register the software.
Earlier in the day, the Securities and Exchange Commission charged Chinese cryptocurrency tycoon Justin Sun with fraud, accusing eight celebrities including actress Lindsay Lohan of illegally promoting his crypto assets.
Coinbase said its services continued to operate as normal after the notice was issued.
A Wells notice does not always result in a charge or an indication that the recipient has violated any law.
Additional reporting by Nikit Nishant in Bengaluru; Editing by Devika Siamnath
Our standards: Thomson Reuters Trust Principles.
“Unapologetic reader. Social media maven. Beer lover. Food fanatic. Zombie advocate. Bacon aficionado. Web practitioner.”