The U.S. Securities and Exchange Commission (SEC) has once again set its sights on a cryptocurrency trading platform, this time targeting the American brokerage and cryptocurrency platform, Robinhood. News on Monday that the SEC issued a Wells notice to Robinhood sent shockwaves through the cryptocurrency community, causing Bitcoin to plummet from $65,500 to the vicinity of $63,200, while Robinhood's stock also briefly fell by 2.5%.
Over the past two years, the SEC has tightened cryptocurrency regulations, instilling fear among investors in the space. The commission has already launched civil lawsuits against platforms like FTX, Binance, and Coindesk, handing out fines totaling over $5 billion. It appears that Robinhood may also face a similar fate, as civil lawsuits often quickly follow the delivery of a Wells notice.
According to legal documents, the SEC issued the notice on May 4, primarily targeting Robinhood's cryptocurrency listing and custody services, alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended.
Dan Gallagher, Robinhood's Chief Legal Officer, stated, "We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law."
Gallagher assured Robinhood customers that the Wells notice would not affect their accounts or services, and that Robinhood's cryptocurrency operations would continue as usual.
Issuing Wells notices to cryptocurrency platforms has seemingly become standard practice for the SEC. Jake Chervinsky, Chief Legal Officer at Variant, commented on the SEC's current strategy, suggesting that the commission is now misusing Wells notices as a means of intimidation.
Chervinsky expressed concern about the number of notices the SEC has issued to cryptocurrency platforms in recent months: "The number they've sent about crypto in recent months is astonishing. It's hard to imagine that they would (or could) bring so many enforcement actions at once. It seems like they're abusing the Wells process as a scare tactic now."
