SEC hits Coinbase partner Circle with subpoena ahead of going public

"We may incur significant liability as a result of several ongoing disputes and investigations," warned Circle in its latest SEC filing.

Stablecoin backer Circle Financial is more than happy to comply with a Securities and Exchange Commission (SEC) investigation. However, it has once again stopped short of actually saying what it’s all about.

The Boston-based firm — served a subpoena in July — has been busy offering the SEC information about its holdings, operations, and customer programs.

The company noted the SEC investigation in regulatory filings issued Monday as it prepares to go public via a SPAC merger.

“[…] In July 2021, we received an investigative subpoena from the SEC Enforcement Division requesting documents and information regarding certain of our holdings, customer programs, and operations. We are cooperating fully with their investigation,” disclosed Circle.

Circle had previously revealed the investigation in an August filing. Around that time, Circle subsidiary exchange Poloniex settled charges with the SEC.

Poloniex was found to be operating as an unregistered exchange between July 2017 and November 2018. Circle set aside more than $10 million to resolve the matter, but denied playing part in the settlement deal.

That scenario came just one month after Circle began welcoming corporate holders of its USDC stablecoin to Circle Yield, a new high-interest yield product.

But if the SEC goes after Circle Yield, it could represent an even bigger spanner in the works.

“We may incur significant liability as a result of several ongoing disputes and investigations,” warned Circle (our emphasis).

“The ultimate resolution of these matters may require substantial cash payments, materially and adversely affect our business, financial condition and results of operation, and may cause dilution to our shareholders.”

Circle buddy Coinbase just not into the SEC

Indeed, Circle has become well-acquainted with regulators over the past few months.

But Circle’s apparent relationship doesn’t compare to the contentious back-and-forth shared by the SEC and top US crypto exchange Coinbase.

Coinbase (which partnered with Circle in 2018 to bring USDC to market) scrapped its proposed USDC lending product on the heels of an SEC threat to sue.

Coinbase chief exec Brian Armstrong snapped back at the agency via Twitter:

They are refusing to offer any opinion in writing to the industry on what should be allowed and why, and instead are engaging in intimidation tactics behind closed doors. Whatever their theory is here, it feels like a reach [or] land grab versus other regulators.

Coinbase chief exec sounded off on the SEC over its canceled Lend product.

And around the same time, authorities in New Jersey and Texas forced Celsius Network to stop offering its own interest-bearing crypto product across those states.

That was shortly after the SEC made clear it considers Coinbase’s Lend an unregistered securities offering.

Follow us on Twitter for more informed crypto news.

[H/T: CoinDesk]