Crypto lawyers say SEC is 'abusing' the Wells process as part of 'carpet bombing campaign' against crypto

Top crypto lawyers have criticized the U.S. Securities and Exchanges Commission over what they view as a high number of Wells Notices sent to crypto companies in recent weeks. This comes shortly after Robinhood was the latest company to say it had received one regarding its crypto unit.

"The SEC just sent a Wells notice to Robinhood," Variant Fund Chief Legal Officer Jake Chervinsky posted on X. "The number they've sent about crypto in recent months is astonishing. It's hard to imagine that they would (or could) bring so many enforcement actions at once. It seems like they're abusing the Wells process as a scare tactic now."

Chervinsky claimed the SEC has disproportionally focused its efforts on crypto instead of the equity and debt markets. "If the SEC brings as many enforcement actions as it has sent Wells notices, it will be in flagrant violation of both the law and its Congressional mandate," he added. "If not, it's clearly abusing the Wells process to get free discovery and terrorize upstanding US companies."

Rodrigo Silva-Herzog, special counsel at Cooley LLP and former Paradigm special counsel, had similar comments. The "SEC continues its carpet bombing campaign against crypto, issuing another Wells to Robinhood. You have to wonder whether at this point Gensler has bit off more than he can chew," he questioned on X.

Earlier Monday, Robinhood revealed that the SEC intended to file an enforcement action against its crypto unit, alleging securities violations, according to a Form 8-K filing.

Robinhood's Chief Legal, Compliance and Corporate Affairs Officer Dan Gallagher also questioned the effectiveness of such a lawsuit. “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law," he said in a statement.

Cracking down on crypto

Last month, decentralized crypto exchange Uniswap received a Wells Notice from the SEC. “It’s been clear for a while that rather than working to create clear, informed rules, the SEC has decided to focus on attacking long-time good actors like Uniswap and Coinbase,” Uniswap founder Hayden Adams said at the time.

Ethereum development studio Consensys also received a Wells Notice from the SEC in April. Consensys later sued the SEC, saying that regulating ether as a security would jeopardize the U.S.'s ability to use Ethereum and other blockchains.

Part of these notices appears to be a focus on Ethereum. Consensys claims the SEC has decided ether is a security — a matter that SEC Chair Gary Gensler has always avoided providing any clarity on. Consensys said the agency had required information on its sales of ether.

The SEC has been probing crypto companies related to the Ethereum Foundation, according to Fortune. The Ethereum Foundation also received a voluntary and confidential inquiry from an unspecified state authority, according to a commit on the Foundation's GitHub repository earlier this year.

Beyond this, the SEC is still undergoing legal action against crypto exchanges Coinbase, Binance and Kraken.