Crypto.com Fights Back: Files Lawsuit Against SEC Over Wells Notice

• Crypto.com exchange is fighting back against the US SEC over a recently received Wells Notice.
• Crypto.com filed a lawsuit, one in many from crypto stakeholders, against the SEC.

Popular crypto exchange Crypto.com filed a lawsuit against the US Securities and Exchange Commission following a recent Wells Notice from the regulator. The lawsuit names the SEC Chairman Gary Gensler and four commissioners as respondents.

According to the details, Foris DAX Inc, a Delaware-based firm operating under Crypto.com’s business name, initiated the court filing.

Crypto.com Responds to SEC’s Well Notice

A Wells Notice is a formal notification from the SEC informing a recipient of the agency’s plan to bring enforcement actions against them. It usually takes the form of a letter. The SEC typically threatens legal action against receivers in Wells notifications.

The notice for Crypto.com indicates that the SEC believes it may have violated securities laws. Crypto.com, however, disagreed with the regulator’s position, calling it “unauthorized and unjust regulation.” 

In response, the company filed a complaint against the securities regulator. Crypto.com argues that the SEC overstepped its authority by claiming most crypto transactions are securities. Crypto.com further claims that the regulator imposed its rule without the statutory notice and comment period required by the Administrative Procedure Act.

The firm is, therefore, seeking declaratory and injunctive relief to prevent the SEC from unlawfully expanding its jurisdiction to cover secondary-market sales of some tokens sold on its platform. 

The lawsuit is part of the company’s larger campaign to stop what it sees as the SEC’s regulatory overreach. Crypto.com filed a separate petition to the SEC, joining the Commodity Futures Trading Commission (CFTC). The firm requests both agencies to confirm via joint interpretation that certain crypto derivative products are solely regulated by the CFTC.

Cronos (CRO), the native token of the Cronos blockchain developed in collaboration with Crypto.com, dropped as much as 4.7% following the lawsuit. At the time of writing, CRO is down 6% in the past day to $0.0755.

SEC Faces Intense Scrutiny

Crypto.com’s lawsuit against the SEC follows an earlier petition from XRP community members. 

As CNF mentioned earlier, the XRP Army has expressed dissatisfaction over the commission’s decision to appeal the July 2023 ruling in its case with Ripple Labs. Proponents indicated interest in stopping the SEC from continuing its litigation against Ripple amid claims that XRP traded on secondary marketplaces are securities.

The petition from the XRP community members claims that the appeal harms the broader crypto market. The XRP Army argued that the SEC has diverted from its fundamental purpose of protecting investors through fair and efficient markets. Instead, they assert that the regulator’s prolonged legal battle with Ripple undermines these goals and has harmed investors.

In a related development, some Veritaseum (VERI) token holders filed a bar complaint against the SEC’s executive, Jorge G. Tenreiro. The executive is accused of misconduct and overreach in the cases he has been involved in. 

This case adds to the SEC’s recent legal woes in relation to the crypto ecosystem.