What is a Wells Notice? – All You Need to Know About the SEC’s Special Notice

What is a Wells Notice? – All You Need to Know About the SEC’s Special Notice

As the crypto industry continues to grow, countries across the world are taking different regulatory approaches towards the nascent space. The United States, for example, has been serving crypto players with a “Wells Notice” through the Securities and Exchange Commission (SEC). But what is it? We will explain in detail the use of a Wells Notice in this article.

SEC Regulatory Investigations

The SEC usually conduct inquiries into any company in the financial sector if it suspects that they haven’t been operating in accordance with the stimulated laws.

The agency’s Division of Enforcement is tasked with investigating crypto players to identify breaches of the stated securities rules. This department investigates things like insider trading, unlicensed securities offerings, and market manipulation.

There are two types of investigation that the SEC’s Enforcement Division Conducts. They include:

AI Trading Robot

Informal Investigations

Such investigations are launched when the Securities and Exchange Commission becomes concerned with a crypto player’s adherence to securities policies. The regulator’s informal investigations are based on intel provided by third-party sources like whistleblowers. But before the Division of Enforcement conducts these investigations, it thoroughly examines the evidence provided.

Formal Investigations

Formal Investigations are only conducted when the Commission obtains sufficient evidence showing certain securities laws were violated by a crypto player.

What is the Purpose of a Wells Notice?

After the SEC completes investigations, it levels enforcement action against the crypto company in question through a Wells Notice. Simply put, a Wells Notice is a formal notification delivered to the targeted firm, informing of the SEC’s intentions to bring charges against it. The notice lists all the impending charges along with evidence. The SEC allows the recipient to reply.

Contents of a Wells Notice

Here is what you should expect in a Wells Notice:

Allegations – The notice states all securities policies that the Securities and Exchange Commission believes the targeted firm breached.

Evidence– The SEC attaches proof on the Wells Notice to support the allegations.

Legal Analysis – In the notice, the SEC explains how the respondent’s conduct violated securities rules.

An Opportunity to Respond– The SEC gives the recipient of the Wells Notice a 28-day window to reply to the allegations. The respondent can provide evidence to support their innocence.

Legal Presentation

In case you are served with a Wells Notice, you should consider hiring a seasoned securities defence lawyer to review the accusations and formulate the best response. In addition, the experienced lawyer may detect factual inconsistencies in the SEC’s Wells Notice that you can capitalize on.

Potential Outcomes

If the respondent agrees to the accusations, they will enter into a negotiation process with the SEC in order to settle the charges. Conversely, in case the Wells Notice recipient denies the accusations, the SEC will go ahead and file a lawsuit.

Crypto Companies Issued a Wells Notice


United States-based crypto exchange Coinbase was served with a Wells Notice in March of this year. At the time, the SEC alleged that the trading platform was involved in market manipulation by artificially inflating the trading volumes. Moreover, the agency accused Coinbase of offering its staking service without securing a license.

Following the Wells Notice, Coinbase emphasized its dedication to staying regulatory compliant. However, the exchange is advocating for the development of a clear rulebook for the crypto industry. Its CEO, Brian Armstrong, has said on several occasions that some of the current financial policies do not apply to digital assets.


In February 2023, the Securities and Exchange Commission delivered a Wells Notice to stablecoin Issuer Paxos. The agency accused the crypto company of issuing unregistered security in the form of BUSD, allegations that Paxos has denied ever since. The SEC then directed the stablecoin issuer to cease minting BUSD tokens.


Understanding why the SEC issues Wells Notices is important for everyone within the crypto space. If you become the recipient, seek the services of a legal expert to help you review the notice.

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Archie Lovell
About Author

Archie Lovell

Archie Lovell, a premier voice in crypto journalism, skillfully demystifies the intricate world of digital currencies. With a keen analytical eye and compelling narratives, Archie's writings delve deep, offering clarity amidst the complexities of blockchain. His expertise and style make him a trusted guide in the crypto space.

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