[NEWS] SEC began investigating Ethereum in March last year, according to ConsenSys court documents

It has been revealed that the SEC (Securities and Exchange Commission) has been investigating Ethereum (ETH) since March last year, as it is suspected of being a security. This was revealed in court documents filed by Consensys, a US blockchain company known for developing Metamask.

According to the documents, it was revealed that SEC Enforcement Director Gurbir Grewal authorized a formal investigation order regarding "Ethereum 2.0" in March last year. This formal order gave SEC staff broad authority to investigate and subpoena individuals and entities involved in Ethereum transactions.

Ethereum 2.0 is an update that transitioned the consensus algorithm to PoS (Proof of Stake) in September 2022.

According to the documents, the investigation is based on the SEC's belief that "potential offerings and sales of certain securities, including Ethereum," have occurred since at least 2018.

The SEC's determination that Ethereum is likely a security contradicts guidance from when Jay Clayton was chairman. In June of that year, then-Division of Corporation Finance Director William Hinman stated in a speech that the SEC's position was that Ethereum, like Bitcoin, is not a security.

The SEC also appears to have formally issued an order to investigate Ethereum on April 13 of last year. Just five days later, Chairman Gary Gensler appeared before the House Financial Services Committee, during which he pointed out that Gensler repeatedly refused to answer questions about Ethereum.

The SEC has since issued subpoenas to a number of individuals and entities investing in Ethereum, including ConsenSys. According to a person familiar with the matter, ConsenSys is one of the few companies dealing in Ethereum-related products that have received a subpoena from the SEC.

Focus on regulating Ethereum

ConsenSys filed a lawsuit against the SEC on the 25th of last month. They argue that the SEC's attempt to classify Ethereum as a security is regulatory overreach, which could stifle innovation and have a negative impact on developers, investors, and organizations that utilize Ethereum's decentralized infrastructure.

The SEC's recent focus on regulating Ethereum is highlighted. In 2018, Chairman Gensler stated in a speech at the Massachusetts Institute of Technology that Ethereum is not considered a security. However, after Ethereum was updated and moved to PoS, Chairman Gensler's stance changed completely.

In addition, ConsenSys received a fourth subpoena from the SEC in March. Then, on the 10th of last month, it also received a Wells Notice, which notifies the EC in advance that it will take legal action against companies and individuals. The SEC also expressed its intention to take enforcement action against the company for allegedly acting as an unregistered broker-dealer offering unregistered securities.

Reference: Court documents
Image: Shutterstock

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