Update: Crypto.com Receives Wells Notice from SEC
We wish to provide the DAO with a concise commentary on the recent announcement regarding Crypto.com’s legal battle with the SEC.
On August 22, 2024, the Securities and Exchange Commission (SEC) issued a Wells Notice to Crypto.com, signaling its intent to recommend enforcement action against the platform. The SEC’s allegations stem from asserting that certain tokens traded on Crypto.com constitute Crypto Asset Securities and that the platform has been operating as an unregistered broker-dealer and securities clearing agency, contravening the Securities Act and Exchange Act. The tokens under scrutiny include SOL, ADA, BNB, FIL, FLOW, ICP, ATOM, ALGO, NEAR, and DASH.
In response to this regulatory challenge, Foris DAX Inc., operating as Crypto.com, has initiated legal proceedings seeking declaratory and injunctive relief. The lawsuit aims to prevent what Crypto.com characterizes as an unlawful expansion of the SEC’s jurisdiction over secondary-market transactions of specific network tokens on its platform.
The crux of Crypto.com’s legal argument rests on several important contentions. We highlight herewith two key points of the filing:
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It seeks a judicial declaration that secondary-market transactions of the targeted network tokens on its platform do not constitute securities transactions as defined by the Securities Act and Exchange Act.
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Crypto.com is petitioning for a declaration that it does not meet the criteria of a securities broker-dealer or securities clearing agency requiring registration under the Exchange Act for its platform operations.
Furthermore, Crypto.com is pursuing permanent injunctive relief to preclude the SEC and its officers from initiating any enforcement action predicated on the notion that transactions involving the targeted network tokens are securities transactions or that Crypto.com is operating as an unregistered broker-dealer or clearing agency.
It is noteworthy that, according to company disclosures, the Crypto.com group of companies maintains compliance with the diverse regulatory framework in the United States. The ongoing litigation has not precipitated any alterations to the company’s business compliance design, underscoring Crypto.com’s confidence in its regulatory posture.
Given the current state of affairs, preemptive measures are not warranted. Crypto.com’s resolute stance and commitment to vigorously defend its position in what is anticipated to be a protracted legal battle against the SEC demonstrate a strong belief in the merits of its case.