Fortune today revealed that the U.S. Securities and Exchange Commission (SEC) is investigating the Ethereum Foundation, headquartered in Switzerland. The SEC has issued subpoenas to three companies, requesting additional documents and financial records related to their dealings with the Ethereum Foundation. The industry believes that this investigation reflects the SEC’s plan to classify ETH as a “security” regulated by the SEC.
The investigation by the SEC began shortly after Ethereum’s transition to a Proof-of-Stake (PoS) chain. The probability of Ethereum spot ETF approval in May is now only 25%, according to Bloomberg analysts. In 2018, Gensler publicly stated that Ethereum was “not a security.” Last night, Coindesk revealed that the Ethereum Foundation’s Swiss headquarters is under investigation by a “certain national institution,” and the related records are registered on the Github database. According to Fortune, the SEC is investigating the Ethereum Foundation and has issued subpoenas to at least three companies, requesting more information and financial records regarding their dealings with the Ethereum Foundation. The Ethereum Foundation is a non-profit organization responsible for overseeing the governance and development of the Ethereum blockchain.
One of the U.S. companies that received a subpoena stated that the SEC seems to be launching an aggressive legal action to classify the second-largest cryptocurrency, ETH, as a “security” regulated by the SEC. According to an anonymous source from one of the companies recently subpoenaed, the SEC’s investigation into the Ethereum Foundation began shortly after Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) network in September 2022. Another company that received a subpoena stated that the scope of their investigation is narrow, mainly focusing on the Ethereum Foundation, and they have received subpoenas in the past few weeks. Anonymous insiders from the three companies that received subpoenas requested anonymity due to concerns about retaliation from SEC Chairman Gary Gensler, with some claiming that Gensler has a retaliatory mindset.
Both the Ethereum Foundation and the SEC declined to comment on the news, with the SEC stating that they “do not comment on whether there may or may not be possible investigations.” Cryptocurrency lawyer Gabriel Shapiro commented to DL News that he believes the SEC’s decision to classify Ethereum as a security would receive support from U.S. courts, otherwise its impact on the real world would be limited.
The news of the SEC’s plan to classify Ethereum as a security has greatly impacted the hopes of financial institutions such as BlackRock and Fidelity for the approval of Ethereum spot ETFs to be listed in May this year. Bloomberg ETF senior analyst Eric Balchunas tweeted last night that they currently estimate the probability of Ethereum spot ETF approval in May to be only 25%, which almost confirms Gensler’s view that ETH is considered a security.
It is worth mentioning that SEC Chairman Gary Gensler’s repeated statements on whether Ethereum is a security have been questioned by the cryptocurrency industry and Congress. He previously claimed in 2018 that tokens such as Bitcoin and Ethereum were “not securities,” but later, after taking office, he refused to directly answer the question of whether ETH is a “security.” However, after Ethereum’s transition to a PoS mechanism, Gensler had previously warned that PoS cryptocurrencies could be subject to securities regulation. In addition, when the SEC postponed its decision on the BlackRock Ethereum spot ETF application for the second time this month, it also solicited public opinions on whether Ethereum’s PoS mechanism raises “unique concerns about fraud and manipulation of Ethereum,” reflecting that PoS is a key point for the SEC to classify Ethereum as a “security.”
After the news broke that the Ethereum Foundation was under investigation by the SEC, ETH briefly dropped to $3,140 in the late night but has now rebounded to $3,549, with an increase of nearly 10% in the past 24 hours.
Source: Trading View
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