Earlier this week, the SEC sent a Wells Notice to Unicoin, a U.S. crypto investment firm. A Wells Notice is a letter from the agency informing that they plan to sue a person or the company.
According to Fortune, the Wells Notice states that the commission will charge Unicoin with fraud, misleading practices, and sales of unregistered securities, but it does not mention specific problems. Gary Gensler, the controversial head of the Securities and Exchange Commission, will leave his post in a month but is still gunning around for crypto before he leaves.
SEC’s crypto team sends subpoenas to Unicoin
The SEC issued a Wells Notice against the crypto firm Unicoin, signaling that Gensler is not done with enforcement actions before he leaves office in January https://t.co/YdpHLNurmR
— Leo Schwartz (@leomschwartz) December 17, 2024
In May, the commission’s crypto team sent subpoenas to the company. Unicoin CEO Alex Konanykhin described the subpoenas as related to Unicoin’s main product, a cryptocurrency backed by real assets, including billions of dollars in real estate.
He added that Unicorn’s lawyers are working on a response due Dec 24. He also shared a common sentiment in crypto land that a lot of Gensler’s enforcement actions are politically fueled. “I can only say one word: bulls–t, complete and utter bulls–t,” says Konanykhin.
It is to be noted that the Wells Notice containing fraud charges against Unicoin has not been seen in recent cases against major crypto companies like Coinbase. The Securities and Exchange Commission is blocking Unicoin because it doesn’t want it to have an ICO (initial coin offering), as per Konanykhin.
A spokesperson said the commission “does not comment on the existence or nonexistence of a possible investigation.”
Unicoin’s CEO believes that the firm has been subject to several SEC investigations due to its novel approach, but the latest is the first to result in a Wells Notice. Konanykhin told Fortune that the company entered into a so-called standstill agreement with the SEC earlier this year not to conduct an ICO or go public. Yet, he argued that he had decided to breach the agreement after Trump had won the recent election.
Gensler races to issue lawsuits before leaving office
The crypto community was optimistic when President Biden nominated Gensler for the SEC, hoping he would adopt an open approach towards the industry with his experience teaching a blockchain course at MIT. However, things took a turn after the collapse of FTX in November 2022, and Gensler distinguished much of the industry as a “Wild West” of scams. He also tried to force companies to operate under existing securities laws, which they claimed was impractical.
The SEC simultaneously filed a barrage of coercive actions against some of the latest companies in the space. It resulted in many of the industry’s top firms, entrepreneurs, and investors campaigning to elect crypto-friendly politicians with the intent of unseating Gensler.
Trump embraced the technology and earned the support of much of the industry which led to Gensler’s announced resignation due in January. That hasn’t halted the SEC from issuing Wells Notices and lawsuits against crypto companies, including CyberKongz, which revealed on X it had received a letter on Monday.
Unicoin’s Wells Notice is the latest in the crypto space, and Konanykhin said that the company would rather engage the SEC in a prolonged legal battle than settle.
The company was founded in 2015 and is connected to the television series Unicorn Hunters. Its token was announced in 2022 and Konanykhin argued that it would overtake Bitcoin as the largest cryptocurrency. The token is collateralized by real-world assets such as real estate holdings. The company initiated a deal early this year acquiring nearly 8,000 acres of land in the Bahamas valued at over half a billion dollars in exchange for the future promise of its token.
Konanykhin disclosed that the firm has sold $3.5 billion worth of Unicoin tokens through similar deals to around 70,000 investors. The company maintains that its token is a security even though it never managed to register the security with the SEC.
The firm had earlier filed paperwork with the agency revealing its intent to go public via a reverse merger. The firm’s CEO believes that the agency’s action is retribution for its plans to move forward with its untested token offering. “How did we get so important to become the final focus of the SEC?” he noted.
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