Summary:

• The SEC has issued a warning to Coinbase about a potential lawsuit for violating some laws.
• Coinbase shares dropped by nearly 9% after the news broke. 
• The potential civil action may seek injunctive relief, disgorgement, and civil penalties, but the company has assured its customers that its business will continue as usual.

The Securities and Exchange Commission (SEC) issued a warning to crypto exchange company, Coinbase, about a potential lawsuit for violating some laws. According to  an online tracker, the company’s shares dropped  by nearly 9% after the news broke.

Called a Wells notice, it is a warning from an SEC staff that they are recommending the commission to undertake an enforcement action for violations. It lets the company know that the SEC is determined to charge them and allows them (usually within 30 days) to respond with proof why the action should not be taken.

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“Based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet. The potential civil action may seek injunctive relief, disgorgement, and civil penalties,” Coinbase said in its filing.

This is just the latest in a series of probing into the crypto industry that has had quite a positive impact on it. While some companies have had to be shuttered due to their wrong actions, the industry in general is faring better with Bitcoin price appreciating weekly.

However, Coinbase has assured its customers that business will continue as usual saying that it is confident in its conduct. Meanwhile, its chief executive, Brian Armstrong, has been one of the most vocal opposers of the SEC actions against crypto companies.

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