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While the reason for the investigation remains blurry, it might be tied to its announcement of going public.
The recent regulatory filings by Circle have revealed that the Stablecoins-focused company has been under investigation by the United States Security and Exchange Commission (SEC) for the last 3 months.
According to the filing made on October 4, the stated that it had received an “investigative subpoena” from the Gary Gensler-led commission which requested that it presented documents and information about its operations, holdings etc. The company went on to reveal that it had been complying with the request of the foremost financial regulator.
“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,” the filing reads in part.
Notably, the company had revealed this in an earlier regulatory filing in August but it had gone unnoticed. With it being repeated again, it means the firm is still being investigated by the authorities.
While the reason for the SEC investigation remains blurry, it might be tied to the announcement by Circle of going public through a special purpose acquisition company (SPAC) which would raise its valuation to $4.5 billion.
Another reason for the investigation could be linked to a press release it had issued around its first regulatory filing in August. According to the press release, Circle would be “offering a well-regulated alternative yield market for institutional investors and corporate treasurers domiciled in the US and Switzerland.”
You’ll recall that Coinbase had revealed a similar intent recently before revealing that the SEC had threatened to sue the firm if it went ahead with the plans. The Brian Armstrong-led crypto firm was forced to shelve the product while accusing the commission of not offering any explanations on how it decided that its Lend product was a security.
In Circle’s case, its high yield product claimed it would allow “institutional investors to leverage yield generating opportunities in a safe, sound and compliant manner in support of high growth digital assets and crypto markets,” which might have put the firm under the SEC radar.
Interestingly, this is not the first face-off between the two. Circle was forced to settle the commission with $10 million after the regulator had alleged that it had acted as an unregistered crypto exchanges in its operations with Poloniex.
Under Gary Gensler, the SEC has maintained that it would look to perform more oversight functions over the crypto industry. The chairman has repeatedly reiterated and urged crypto-related firms to register with the commission so that they would be able to better protect investors.