The SEC in March 2023 launched its formal investigation into ether, lawyers from Consensys allege in new, unredacted complaint.
The US Securities and Exchange Commission has been investigating ethereum and its potential status as a security for over a year, new court filings Monday reveal.
Consensys, which filed its lawsuit against the SEC last week, alleges the SEC has been quietly building its case against ether since at least early 2023 in a plan to reverse its previous public assertion that the asset is a commodity.
The crypto firm claims that SEC director of the division of enforcement Gurbir Grewal in March 2023 approved a Formal Order of Investigation into the buying and selling of ether. Formal Orders allow the agency to issue subpoenas and collect witness testimony under oath.
The timeline, Consensys says, explains why in April 2023 SEC Chairman Gary Gensler refused to answer whether or not ether was a commodity or a security when asked during Congressional testimony.
“He did not want to admit that his SEC had already secretly cemented its power-grab by issuing an order of investigation designating ETH as a security,” Consensys’ team wrote in the unredacted complaint, filed Monday.
Consensys’ suit makes two major claims. First, that ether is not a security and the SEC’s investigation is unlawful. Second, Consensys says the SEC has plans to target the company for its MetaMask product, which securities regulators say is a broker-dealer.
Consensys received a Wells notice stating the SEC wanted to pursue an enforcement action against them for alleged securities law violations via its MetaMask Swaps and Staking products, the complaint adds. The Wells notice, according to the complaint, does not mention any charges against Consensys relating to ETH specifically.
Historically, the SEC has targeted specific tokens by naming them as securities in lawsuits it files against exchanges. In the agency’s June 2023 lawsuits against Coinbase and Binance, more than ten tokens — whose issuers were not named as co-defendants — were listed as securities in each complaint. ETH was not listed in either suit.
Representatives from the SEC declined to comment.