Uniswap founder Hayden Adams announced this morning that he has received a Wells Notice from the SEC and may face possible litigation. As a result, UNI, the platform’s token, plummeted by 15%.
In response to the news, the Uniswap token dropped from $11.2 to a low of $9.495, representing a rapid decline of nearly 15% within six hours.
What is a Wells Notice? A Wells Notice is typically a notification issued by the SEC to individuals or companies after an investigation, indicating that the SEC believes they may have violated securities laws. After receiving the notice, the SEC has six months to decide whether to file a lawsuit and take enforcement action. Companies that receive a notice from the SEC also have the right to respond and provide explanations.
Last March, Coinbase, the largest cryptocurrency exchange in the United States, also received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), causing its stock price to plummet by over 15% in after-hours trading.
Facing the approaching legal action by the SEC, Coinbase stated in a declaration at the time that the SEC’s regulatory position is unclear, leaving cryptocurrency companies without guidance on how to proceed. They deemed the sudden and threatening enforcement action meaningless and filed a lawsuit against the SEC in federal court, requesting a clear response to their petition for the SEC to use its formal rule-making process to provide guidance to the cryptocurrency industry by July 2022.
Coinbase’s Chief Legal Officer, Paul Grewal, stated that the company had submitted multiple registration proposals to the SEC over the course of several months, but all proposals were ultimately rejected or met with no response from the SEC, resulting in the issuance of a Wells Notice.
Regardless of whether the SEC ultimately files a lawsuit against Uniswap, this action has cast a shadow over the development of the DeFi industry.