Whistleblower independent analysis

CoinBase Plan May Be A Security

The CoinBase Wells Notice is creating quite a stir. My original comments are here, but more information has come to light.

It appears from other comments that the CoinBase Lend program is not simply a loan by depositors to others. According to other posts, CoinBase is planning on pooling the assets of its depositors and then creating loans from that pool.

That my friends, is a different kettle of fish, for the pooling of assets for investment purposes is in fact a security. If that is what they are planning on doing, the interest in the pool meets the Howey test – an investment of money in a common enterprise, with the expectation of making a profit from the efforts of others. The customer’s interest in the pool would be a security.

Adam Levitin has an excellent analysis of the plan at the Credit Slips blog.

Other posters are mocking the General Counsel of CoinBase for “whining” about the SEC‘s lack of transparency in the Wells Notice. I suspect that those posters have never dealt with an SEC Wells Notice, which quite often is simply a statement that the Staff intends to recommend enforcement action for violation of a particular statute.

While it is true that a Wells Notice comes after an investigation, in which the target participated, and after discussions with the Staff, the often cryptic language presents a problem for the target in deciding whether to respond and how to respond. Assuming too much raises additional questions, not saying enough dooms the response to failure.

Rather than mock the GC, we should be applauding the public posting objecting to the Wells Notice and the lack of clarity that apparently exists in this particular notice.


The attorneys at Sallah Astarita & Cox, LLC have over 100 years of combined experience representing all participants in the securities markets, including the cryptocurrency markets. For a consultation, or to simply ask a question, give them a call at 212-509-6544
The Securities Law Blog is a service of SECLaw.com, and Mark Astarita, a national securities lawyer with the law firm of Sallah Astarita & Cox, LLC

Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | mja@sallahlaw.com | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.

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