Coinbase Tumbles 15% on Wells Notice From SEC

Coinbase Global (COIN:US) stock is trading about 15% down on Thursday after the digital asset exchange disclosed in a filing on Wednesday that it received a ‘Wells Notice’.

The notice is sent by the U.S. Securities and Exchange Commission (SEC) and it typically acts as a precursor before the regulator sues the company in question. Coinbase is accused of violations of federal securities laws, including the Securities Exchange Act of 1934, the company said.

“Based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet. The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”

CEO Brian Armstrong responded on Twitter by saying COIN will continue to “work with all governments and regulators around the world who are focused on putting in place clear rules to regulate the crypto industry.”

Given that it acts as a proxy for the volatile cryptocurrency market, Coinbase is a popular stock for trading. Congress members Shri Thanedar and Marie Newman were both selling shares late last year while their colleague Garret Graves invested in Coinbase in September. 

Rep. Newman is reported numerous transactions involving Coinbase shares since the company went public, including the $50,000 - $100,000 sale on November 05, 2021.

In the meantime, Bitcoin (BTC:US) trades just above $28,000.