Paxos Trust Co, a stablecoin issuer and producer, faces a major lawsuit over alleged violations of laws to protect investors.
The Wall Street Journal (WSJ) reported the United States Securities and Exchange Commission (SEC) had launched the suit due to Binance USD (BUSD). Paxos backed the stablecoin with USD after inking a deal with the world’s largest exchange by volume in September 2019.
BUSD is the third largest stablecoin by market capitalisation at $16 billion USD.
The SEC slapped Paxos with a Wells notice signalling imminent enforcement action, the WSJ reported, citing people familiar with the matter.
The sources added the notice accuses BUSD of functioning as an unregistered security. The news comes after the New York Department of Financial Services (NYDFS) launched investigations on Paxos. Reports have not provided clarity on the investigations.
The news comes after the SEC hit cryptocurrency exchange giant Kraken with a similar investigation, citing alleged unregistered securities sales.
SEC chairman Gary Gensler ordered the platform to register with it as it conducted crypto transactions.
Kraken chief executive Dave Ripley told Reuters that Kraken had no plans to register with the SEC or delist any crypto offerings targeted by the SEC as securities.
Despite this, Kraken agreed to stop its crypto-staking programme in its $30 million USD settlement with the regulator, sources familiar with the industry told reporters.
