Earlier this week, the Securities and Exchange Commission sent a Wells Notice to Unicoin, a US cryptocurrency investment firm. A Wells Notice is a letter from the agency informing them that they plan to sue a person or company.
According to Fortune, Wells’ notice states that the commission will charge Unicoin with fraud, deceptive practices, and selling unregistered securities, but does not mention specific issues. Controversial SEC Chairman Gary Gensler is leaving his post in a month, but he’s still looking into cryptocurrencies before he leaves.
SEC's Cryptocurrency Task Force Sends Subpoenas to Unicoin
The SEC has issued a good cause notice against cryptocurrency company Unicoin, suggesting Gensler did not complete enforcement actions before he left 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. Alex Konanykhin, Unicoin’s CEO, described the subpoenas as relating to Unicoin’s flagship product, a cryptocurrency backed by real-world assets, including billions of dollars in real estate.
He added that Unicorn’s lawyers are working on a response due on December 24. He also shared a common sentiment in crypto space that much of Gensler’s enforcement action is politically motivated. “I can only say one word: bulls-r, complete and utter bulls-r,” Konanykhin said.
It’s worth noting that Wells’ notice of fraud allegations against Unicoin has not been seen in recent cases against major crypto companies like Coinbase. The SEC is blocking Unicoin because it doesn’t want it to have an ICO (initial coin offering), according to Konanykhin.
A committee spokesman said the committee “does not comment on the existence or absence of a potential investigation.”
The Unicoin CEO believes the company has been the subject of multiple SEC investigations because of its new approach, but the latest is the first to bring Wells to 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. However, he said he decided to break the agreement after Trump won the recent election.
The crypto community was optimistic when Biden nominated Gensler to the SEC, hoping he would bring an open-minded approach to the industry with his experience teaching a blockchain course at MIT. However, things took a turn after the collapse of FTX in November 2022, with Gensler characterizing the industry as a “Wild West” of scams by many. He also tried to force companies to operate under existing securities laws, which they claimed were impractical.
At the same time, the SEC has launched a barrage of enforcement actions against some of the newest companies in the space. This has led to a number of major companies, entrepreneurs, and investors in the industry campaigning for crypto-friendly politicians to oust Gensler.
Trump embraced the technology and won the support of much of the industry, leading to Gensler’s announced resignation in January. That hasn’t stopped the SEC from issuing notices of disapproval and lawsuits against crypto companies, including CyberKongz, which revealed on X that it received a letter on Monday.
Wells’ Unicoin notice is the latest in a series of legal battles in the crypto space, and Konanykhin said the company would rather engage the SEC in a lengthy legal battle than settle.
The company was founded in 2015 and is associated with the TV series Unicorn Hunters. Its token was announced in 2022, and Konanykhin argued that it would overtake Bitcoin as the largest cryptocurrency. The token is backed by real assets such as real estate. The company began a deal earlier this year to acquire nearly 8,000 acres of land in the Bahamas worth more than half a billion dollars in exchange for the future promise of its token.
Konanykhin revealed that the company sold $3.5 billion worth of Unicoin tokens through similar deals to about 70,000 investors. The company maintains that its token is a security, although it has never been able to register the security with the SEC.
The company had previously filed paperwork with the agency disclosing its intention to go public via a reverse merger. The company’s CEO believes the agency’s action is retaliation for its plans to move forward with its untested premium offering. “How did we become so important that we became the ultimate focus of the SEC?” he noted.