IMX extends losses after Immutable faces SEC Wells Notice over token sales

IMX declined over 13% on Friday following Immutable's announcement that it received a Wells Notice from the Securities & Exchange Commission (SEC), presumably due to the private sale of its tokens in 2021.

IMX declines as SEC serves Immutable Wells Notice

Immutable, the company behind Layer-2 gaming blockchain Immutable X, announced in a blog post on Thursday that it received a Wells Notice from the SEC, likely due to its private sales of IMX tokens in 2021. This makes it the latest among a long list of crypto companies targeted by the SEC.

A Wells Notice is a document indicating that the SEC has completed investigating a company and intends to take enforcement action. It also allows the recipient to respond to the regulator's claims before an enforcement action is taken.

The company stated that it received the Notice only hours after having its first meeting with the regulator, which was quicker than expected.

"In our very first interaction with the SEC, we were told a Wells Notice would be issued to the company within the week. We then received it within hours," Immutable wrote in a blog post.

The urgency with which the Notice was issued raised questions concerning the SEC's regulatory methods. Additionally, the company accused the SEC of only citing the statutory provisions without detailing the nature of its investigation.

Other notable crypto community members also shared their thoughts on the issue.

"Wells Notices are supposed to be part of a neutral and fair process giving investigation targets a chance to explain why the SEC shouldn't enforce against them. There is no justification for sending Wells Notices like this," said Variant Chief Legal Officer Jake Chervinsky in a post on social media platform X.

The SEC has issued Wells Notices to several key crypto firms in the past few months, including Consensys, Uniswap and OpenSea. As a result, many regard the current administration's crackdown on crypto companies as a "regulation by enforcement" approach.

The crypto community is also hopeful of a better regulatory environment for the industry after the presidential election, which is only four days away.

IMX/USDT daily chart

IMX saw harsh declines following the announcement, diving 13% in the past 24 hours. The L2 token could see heavy declines if it sustains a daily candlestick close below the support level at $1.041.