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Crypto Lawyer Accuses SEC of Abusing Wells Notice, CFTC: Enforcement Actions Will Only Increase

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Crypto Lawyer Accuses SEC of Abusing Wells Notice, CFTC: Enforcement Actions Will Only Increase

Facing recent "blanket bombing" notices to crypto companies from Wales, many lawyers have criticized the U.S. Securities and Exchange Commission (SEC) for abusing the enforcement process as a means of intimidation against crypto firms. 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.

Legal Professionals Criticize SEC for Abusing Wells Notices

Firstly, Jake Chervinsky, General Counsel at Variant Fund, 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 is using it as a form of intimidation and attempting to continue to abuse the process.

He added, "The SEC's excessive focus on crypto rather than the stock and bond markets goes against the concept of the power granted to it by Congress."

Additionally, Rodrigo Silva-Herzog, former Legal Counsel at Paradigm, pointed out the ambiguity in SEC enforcement and suggested that it may be exceeding its jurisdiction:

SEC Chairman Gensler may be in a difficult situation as a result.

Meanwhile, Ryan Sean Adams, co-founder of Bankless, brought up the upcoming U.S. election stating:

This level of overregulation has undermined the legitimacy of the SEC and could cost the Democratic Party the election, which I believe is not what they want.

Inventory of Companies Recently Targeted by the SEC

Over the past two months, and even the past year, both exchanges and DeFi protocols are on edge, fearing that they may receive Wells Notices from the SEC. Numerous crypto-related companies have already been under scrutiny by the SEC:

  • February 2023: SEC to sue BUSD issuer Paxos for allegedly issuing unregistered securities
  • March 2023: SushiSwap subpoenaed, proposes setting up a $3 million USDT legal defense fund
  • March 2023: Coinbase fights back against SEC Wells Notices, General Counsel criticizes: Enforcement without regulatory guidance
  • April 2024: SEC targets ETH, MetaMask wallets, developer Consensys countersues SEC
  • April 2024: Uniswap receives Wells Notice, co-founder vows to fight SEC to the end
  • May 2024: Continuing enforcement by SEC, following Uniswap and Consensys, Robinhood also receives Wells Notice

Co-founder of Uniswap, Hayden Adams, also shared a meme poking fun at the situation, joking about joining forces with related companies to combat the SEC.

Currently, the SEC and CFTC are in legal battles with multiple exchanges such as Binance, Coinbase, Kraken, and KuCoin.

Consensys sues SEC, supports Ethereum, highlighting "Four Reasons" why ETH is not a security

CFTC Chairman: Enforcement Actions in Crypto Will Only Increase in the Next Two Years

On the other hand, CFTC Chairman Rostin Behnam revealed at yesterday's Milken Institute Global Conference that with the increasing interest of retail investors and the rising market cap of the crypto market, enforcement actions will also rapidly increase:

From a regulatory perspective, we may see another cycle of increased enforcement actions in the next six months to a year and a half, or in the next two years.

Approximately one-third of all enforcement actions taken against crypto companies by the CFTC occurred in 2023, according to reports.