The crypto firms on Gary Gensler’s naughty list: ‘Congrats and welcome to the club!’

The crypto firms on Gary Gensler’s naughty list: ‘Congrats and welcome to the club!’
Regulation
Under Chair Gary Gensler, the SEC doled out a raft of legal challenges to crypto in 2024. Illustrator: Gwen P; Photos: Shutterstock
  • Many crypto companies said they got a surprise gift in 2024.
  • The crypto industry hopes new SEC leadership will end Wells notices.
  • Uniswap Labs, Consenys, and OpenSea are some of the agency’s targets.

“In the first quarter of the fiscal year, my regulator gave to me, one Wells notice and allegations I’ve issued an illegal security.”

That’s what staffers at the Securities and Exchange Commission are singing as the holidays bring a lull in the markets — or, at least, that’s what we imagine they’re crooning while they sip their egg nog.

For SEC Chair Gary Gensler, it’s been a busy year in his campaign to rein in a crypto industry he argues regularly runs afoul of securities laws.

One of his agency’s favourite gifts to crypto companies? Wells notices, or when the SEC tells companies it has made the preliminary determination to take legal action against them.

A Wells notice doesn’t mean the regulator will sue its target. Companies have the chance to rebut the SEC’s claims, and sometimes the SEC lets things lie.

Still, it’s a serious sign that the agency has scrutinised a business and considers enforcement a real possibility.

Gensler is on his way out, and President-elect Donald Trump’s nominee for chair, Paul Atkins, has a more favourable view of crypto.

Here’s an incomplete list of companies that announced in 2024 they had received a Wells notice — and may have high hopes Atkins won’t follow through on the SEC’s threats of enforcement.

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Uniswap Labs

In April, Hayden Adams, the CEO of Uniswap Labs, announced that his firm had received a notice.

“I’m not surprised. Just annoyed, disappointed, and ready to fight,” he posted on X.

Uniswap is one of DeFi’s largest decentralised exchanges, or protocols where traders can buy and sell crypto without going through a centralised entity, like Coinbase.

‘I’m long Wells notice companies.’

—  Brian Armstrong, Coinbase

It has processed almost $1.6 trillion in trading volumes since its launch in 2018, according to DefiLlama.

The SEC has argued that Uniswap is an unregistered securities exchange, said Uniswap Labs in response to the agency’s Wells notice.

If the SEC were to sue Uniswap Labs, it would be the agency’s largest broadside against DeFi to date.

Consensys

A little more than two weeks after Adams went public with the SEC’s scrutiny of Uniswap Labs, Consenys, the developer behind the popular crypto wallet MetaMask, decided to play offense.

In its announcement that it had received a Wells notice, Consensys itself sued the SEC in an ask for “regulatory clarity” about Ether.

At the time, the SEC was investigating whether the second largest cryptocurrency was an unregistered security.

The agency later abandoned that investigation, but, in July, the SEC sued Consensys over MetaMask, alleging that the wallet is an unregistered securities broker, among other claims.

Litigation is still ongoing, and in September, a Texas judge threw out Consensys’ retaliatory suit.

Robinhood Crypto

In May, the SEC targeted Robinhood.

In a public notice to its investors, the trading app said it had received a Wells notice regarding its crypto business.

“The assets listed on our platform are not securities,” Dan Gallagher, the company’s chief legal officer, said in a statement.

Gallagher did not explicitly say why the SEC targeted Robinhood,

Still, his assertion that the trading app had avoided risky assets implies that the agency was focused on whether Robinhood’s crypto arm sold unregistered securities.

The SEC has gone after Robinhood before, but it has yet to file a new lawsuit.

OpenSea

As publicly disclosed Wells notices go, the summer was relatively quiet — until late August.

On X, Devin Finzer, cofounder and CEO of the NFT marketplace OpenSea, announced that his company had “recently” received the fateful document.

Like Uniswap, OpenSea would be new territory for the agency.

While the SEC has gone after a small number of NFT projects, it would be the first time the agency has sued an NFT marketplace.

Crypto.com

Like Consensys, Crypto.com decided to launch a retaliatory strike.

In October, the exchange sued the SEC on the heels of its Wells notice. Its complaints were similar to those from Consensys: regulatory clarity.

Specifically, it asked a judge to declare that six cryptocurrencies are not securities, including Solana, Cardano, and Algorand.

Crypto.com wasn’t successful in its legal challenge. In December, a judge dismissed the exchange’s lawsuit.

The SEC has yet to launch its own suit against Crypto.com.

And three more

By the end of 2024, Wells notices almost became a badge of honour for crypto companies.

“Congrats and welcome to the club!” Brian Armstrong, the CEO of Coinbase, posted in response to OpenSea’s disclosure that it was targeted by the SEC.

“I’m long Wells notice companies,” added the executive, whose own company had received a notice in 2023 before the SEC eventually sued his firm.

In November, Immutable Labs, the main developer behind a gaming blockchain, disclosed that the SEC had targeted it, too.

One month later, CyberKongz, an NFT collection with a connected crypto game, said it was also a recipient.

And just last week, Unicoin went public with its own letter from the SEC.

Private companies, however, don’t have to disclose Wells notices, and others may be sitting on SEC communiqués.

But, if Atkins proves to be as pro-crypto as supporters hope, these crypto companies may be able to rewrap their gifts from Gensler and return them to sender.

Ben Weiss is DL News’ Dubai Correspondent. Got a tip? Email him at bweiss@dlnews.com.