Why SEC’s “Remarkable Admission” Has Coinbase CLO Up in Arms

Coinbase CLO Paul Grewal rallies the mob against the SEC over a “remarkable admission” in the DEBT Box case.

Paul Grewal reading his book, inspiring people to cheer in his shadow.
Created by Kornelija Poderskytė from DailyCoin
  • The SEC case against DEBT Box is back in focus.
  • A statement in a recent SEC filing in the case has drawn the ire of Coinbase CLO Paul Grewal.
  • Grewal’s observations have cast doubt on whether the SEC follows due processes in crypto enforcement actions.

For crypto proponents, the SEC case against DEBT Box is the case that keeps giving.

The case has seen the federal agency slammed and sanctioned by U.S. District Court Judge Robert Shelby for “materially false and misleading representations” in attempts to prove its case that the firm defrauded investors of over $50 million. At the same time, the agency’s efforts to dismiss the case without prejudice, which could see it go after the firm again, have also failed, with DEBT Box on its part seeking a dismissal with prejudice. 


On Monday, May 13, the SEC filed to resist DEBT Box’s hunt for a case dismissal with prejudice. However, a line in this filing has drawn fire from Coinbase CLO Paul Grewal. He alleges that the statement suggests that the agency has failed to follow due process in its enforcement actions against crypto firms and is attempting to lie about it. Is the SEC failing to follow due process in crypto enforcement actions?

SEC Wells Process Questioned

Responding to a DEBT Box claim that “the SEC must provide ‘its entire investigative file’ to parties when it provides a Wells notice,” the agency, in its Monday filing, asserted that its staff “typically provides a thorough explanation of the evidence” used to prove potential charges against an entity. However, according to Grewal, who described the statement as a “remarkable admission,” this was not the case with Coinbase.

"We received no 'thorough explanation' of the evidence of what assets supposedly gave rise to securities transactions.  We weren't told what assets were at issue at all.  Why would the government not follow its 'typical' process in our case, and what does that say about its claims?" He wrote in a May 14 X post.

Grewal further implied that this issue was not limited to Coinbase alone, tagging several other crypto firms that have come into the SEC’s crosshairs.

“What about you @RobinhoodApp, [sic] did you get a ‘thorough explanation’ in your Wells process?  How about you @Ripple?  @Uniswap? @krakenfx? @BinanceUS ?  Anyone else?  


This is straight up [sic] gaslighting before Judge Shelby and the United States District Court. It should not stand,” he submitted in a rallying cry to the industry.

Unsurprisingly, Grewal’s statements have sparked a flurry of criticisms against the SEC for allegedly acting in bad faith in crypto enforcement actions. But, according to former SEC Regional Director Marc Fagel, these views may be misguided.

A Case By Case Issue

According to Fagel, the information shared in a Wells Notice depends on the case and who handles it.

"'Typically' is doing a lot of work for the SEC here. There is a wide range of practices regarding how much or how little information to share with proposed defendants during Wells discussions. Depends on the nature of the case and (unfortunately) on the particular SEC staff," he wrote in response to Grewal.

Responding to whether Grewal’s observations could be used against the SEC in the Coinbase case, he noted that they were “irrelevant” to the case.

"it's irrelevant to the lawsuit. There is no legal requirement for the SEC to share a particular amount of information (or any, for that matter) with a defendant before filing suit."

In June 2023, the SEC sued Coinbase for allegedly facilitating the trading of several unregistered securities in line with the agency’s view under Chair Gary Gensler that most crypto assets are unregistered securities. Coinbase has refuted the SEC’s classification of digital assets on the exchange, accusing the agency of trying to expand the definition of an investment contract without formal rulemaking.

On the Flipside 

  • The SEC has claimed that its shortcomings in the DEBT Box case resulted from negligence rather than malice.
  • Coinbase failed to toss the SEC case against it, with the judge siding with the agency in all but one claim.

Why This Matters

Despite calls for regulatory clarity, the SEC has continued to carry out enforcement actions against crypto firms, asserting that traditional securities laws are sufficient to guide the industry. This approach has led many to believe that the regulator is not acting in good faith with the industry. Grewal’s recent rallying cries questioning the SEC’s Wells notice process in actions against crypto firms further fuels the narrative. However, judging from Fagel’s statements, the latest claims of unfair treatment may be misguided.

Read this for more on the SEC’s stance on crypto enforcement:
Gary Gensler Defends Robinhood Action: SEC Follows the Law

Another Polygon Labs executive has jumped ship. Learn more:
Polygon (MATIC) Labs Head of DeFi Jumps Ship, Joins Berachain

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.