Encryption Lawyer Accuses SEC of Abusing Wells Notice, CFTC: Expect More Enforcement Actions
Facing the recent “carpet bombing” of Wells Notices against crypto companies, many lawyers have criticized the U.S. Securities and Exchange Commission (SEC) for abusing the enforcement process as a means of intimidation against crypto enterprises. On the other hand, the Chairman of the U.S. Commodity Futures Trading Commission (CFTC) has stated that there will be even more crypto enforcement actions in the next two years.
Firstly, Jake Chervinsky, General Counsel of venture capital firm Variant Fund, strongly criticized the SEC, stating that it is abusing Wells Notices. The number of Wells Notices issued by the SEC recently is beyond imagination, clearly indicating that the SEC views it as a means of intimidation and is attempting to continue abusing the process.
Additionally, Rodrigo Silva-Herzog, former legal advisor at Paradigm, pointed out that the SEC’s enforcement actions are ambiguous and may exceed its jurisdiction. SEC Chairman Gensler may have found himself in a difficult predicament as a result.
Ryan Sean Adams, co-founder of Bankless, mentioned the upcoming U.S. election in relation to this excessive level of regulation. He stated that such overregulation has undermined the legitimacy of the SEC and could potentially lead to the Democratic Party losing the election, which he believes is not what they want.
In the past two months, or even the past year, both exchanges and DeFi protocols have been on edge, fearing that they will receive Wells Notices from the SEC. Numerous crypto-related companies have already been targeted by the SEC:
– February 2023: SEC will sue BUSD issuer Paxos for allegedly issuing unregistered securities.
– March 2023: SushiSwap receives a subpoena, proposing the establishment of a $3 million USDT legal defense fund.
– March 2023: Coinbase fights back against SEC Wells Notices, with its General Counsel criticizing the lack of regulatory rules despite enforcement actions.
– April 2024: SEC targets ETH and MetaMask wallets, and Consensys, the developer, countersues the SEC.
– April 2024: Uniswap receives a Wells Notice, and the founder states that they will fight against the SEC to the end.
– May 2024: SEC’s enforcement actions continue, with Robinhood receiving a Wells Notice following Uniswap and Consensys.
– Hayden Adams, co-founder of Uniswap, also releases a meme, jokingly stating that they will join forces with related companies to fight against the SEC.
Currently, the SEC and CFTC are also battling it out with multiple exchanges, including Binance, Coinbase, Kraken, and KuCoin, in court.
On the other hand, CFTC Chairman Rostin Behnam revealed at the recent Milken Institute Global Conference that as retail investors’ interest and the market value of cryptocurrencies continue to rise, enforcement actions will also increase rapidly:
“From my perspective as a regulator, we may see another cycle of increased enforcement actions in the next six months to a year and a half, or within the next two years.”
It is reported that approximately one-third of all enforcement actions taken by the CFTC against crypto companies occurred in 2023.
