Coinbase Chief Legal Officer Calls Out SEC for ‘Gaslighting’ Crypto Project, Says Practice Should Not Stand

Coinbase’s chief legal officer thinks the U.S. Securities and Exchange Commission (SEC) is “gaslighting” the US courts and the crypto sector.

Coinbase CLO Paul Grewal calls attention to the SEC’s case against Digital Licensing Inc., a Utah-based company that was doing business under the name “DEBT Box.”

“In a brief to avoid dismissal of its case against Debt Box with prejudice, the SEC includes a remarkable admission that it did not follow its own typical Wells process when it refused to tell us what assets would be charged as securities: ‘The Wells process is designed to aid the charging decision for a specific potential defendant. The SEC staff typically provides a thorough explanation of the evidence it would use to prove potential charges against a particular person or entity.’” 

A Wells notice is a warning issued by the SEC that indicates the regulator is planning to pursue legal action against a company. Coinbase received one in March 2023, a few months before the regulator launched a lawsuit against the exchange for allegedly violating securities laws.

Grewal argues that Coinbase’s Wells notice didn’t include an explanation of what crypto assets were linked to securities transactions.

“We weren’t told what assets were at issue at all. Why would the government not follow its ‘typical’ process in our case, and what does that say about its claims?”

The SEC sent a Wells notice to Robinhood’s crypto trading arm earlier this month and Uniswap Labs in April. The regulator has also launched lawsuits against Binance and Kraken, accusing both exchanges of violating securities laws.

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