Marc Fagel, a former official of the U.S. Securities and Exchange Commission (SEC), has expressed concerns over the agency’s recent move to issue a Wells Notice to Ethereum-based Web3 gaming company Immutable.
The company had explained that the notice came without prior communication or comprehensive disclosure, unlike the SEC's typical comprehensive investigation process.
According to Fagel, it is rare for the SEC to issue a Wells Notice without conducting a thorough investigation, a process that typically involves months of discussions and dialogue between the regulator and the targeted company. Deviating from this standard practice can pose significant risks. “Issuing a notice without a thorough investigation or significant groundwork is risky,” Fagel said, noting that such an approach could undermine the regulator’s credibility or invite criticism of procedural fairness.
The incident drew attention after Immutable disclosed on Nov. 1 that it had received a Wells Notice from the SEC the previous month, indicating potential enforcement action. In addition, a letter was sent to Immutable CEO James Ferguson and the Digital Worlds Foundation, which played a role in the company’s launch of the IMX token. The letter outlined alleged violations of U.S. securities laws and raised questions about the regulatory environment for blockchain-based assets.
*This is not investment advice.