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Home Crypto News

Paxos Receives Wells Notice From SEC

Admin by Admin
February 13, 2023
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Paxos Receives Wells Notice from SEC
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The New York-based financial institution and technology company, Paxos, has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC) regarding alleged violations of investor protection laws. Paxos revealed the following day, that it would no longer mint BUSD and it was ending its relationship with the Binance-branded stablecoin in Feb. 2024.

The U.S. Securities and Exchange Commission (SEC) plans to sue Paxos for violating investor protection laws. People familiar with the matter say Paxos received a Wells Notice, a letter sent by a securities regulator regarding a prospective lawsuit. The notice alleges that the stablecoin Binance USD, which Paxos issues and manages, is an unregistered security.

Three WSJ reporters published the report and contacted both Paxos and Binance for comment. Binance informed the WSJ that the stablecoin’s brand is licensed by the major exchange, but Paxos issues and manages the dollar-pegged asset.

A Paxos spokesperson told the reporters that the company is not commenting on any individual matter. The latest news follows an alleged investigation into Paxos by the New York State Department of Financial Services (NYDFS), which was originally reported by Nikhilesh De of Coindesk on Feb. 9.

Paxos was founded in 2012 and was originally named Itbit. In 2015, the New York State Department of Financial Services (NYDFS) granted permission for Paxos to become a limited-purpose trust charter and the company changed its name from Itbit to Paxos Trust Company.

The firm manages two stablecoins: pax dollar (USDP) and Binance USD (BUSD), as well as pax gold (PAXG). USDP has a market capitalization of approximately $898.16 million, while BUSD’s market valuation is estimated at around $16.1 billion.

PAXG has a market capitalization of approximately $492 million. Over the last 12 months, the supply of PAXG has declined by approximately 3.1%, while USDP has declined by 15.71%. Year-to-date statistics show BUSD’s circulating supply has dropped 9%, but during the mid-half of 2022, BUSD’s supply increased.

Last month, 5 billion BUSD were redeemed in 24 days. Binance told the WSJ that it will “continue to monitor the situation” when questioned about the alleged SEC charges against Paxos. To date, the country’s top securities regulator has not taken any enforcement action against stablecoin issuers.

The New York Department of Financial Services (NYDFS) has ordered the company to stop issuing BUSD. Paxos confirmed in a press release that it will stop minting the stablecoin and end its relationship with it by 2024. The company stated that it was directed by the New York regulator and has been working closely with the authorities. Paxos will continue to manage BUSD until they are fully redeemed, which will be by at least February 2024

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