SEC Targets Immutable’s 2021 IMX Token Sales with Wells Notice

TLDR

• Immutable received a Wells Notice from SEC regarding its 2021 IMX token sales
• SEC delivered notice within hours of first interaction, with minimal explanation
• IMX token dropped over 13% to $1.16 following the announcement
• The notice potentially targets listing and private sales involving Huobi Ventures
• Company disputes SEC’s approach, calling it “regulation by enforcement”

Web3 gaming company Immutable received a Wells Notice from the U.S. Securities and Exchange Commission (SEC) on November 1, 2024, regarding the sale of its IMX tokens in 2021.

The notice arrived just hours after the company’s first interaction with the regulatory body.

The Wells Notice, which signals the SEC’s intent to bring enforcement action, contained minimal detail about the nature of the investigation.

According to Immutable’s statement, the notice included fewer than 20 words of material explanation and merely cited statutory provisions.

The regulatory action appears to focus on Immutable’s listing and private sales of IMX tokens in 2021, particularly a pre-launch investment by Huobi Ventures Blockchain Fund.

The deal involved IMX tokens priced at $0.10, issued at what was termed a “$10 pre-100:1 split.”

In response to the notice, Immutable strongly disputed the SEC’s approach. The company stated that while the SEC claimed there was no “exchange of value” in the Huobi Ventures deal, Immutable maintains the investment was legitimate and supported by “real consideration.”

The market reacted swiftly to the news, with Immutable’s IMX token dropping more than 13% to $1.16 within 24 hours of the announcement. The price movement reflects investor concern over potential regulatory consequences.

The notice wasn’t limited to the company alone. Both the CEO of Immutable and the Digital Worlds Foundation, which serves as the parent entity of the IMX token issuer, received separate notices.

The company also disclosed awareness of “related inquiries” from the Department of Justice, though no legal action has been proposed.

Immutable joins a growing list of crypto companies that have received Wells Notices from the SEC. Other notable firms include Coinbase, Consensys, Ripple, OpenSea, and Crypto.com, highlighting the regulator’s increased focus on the cryptocurrency sector.

Robbie Ferguson, Immutable’s co-founder, publicly addressed the situation, expressing the company’s commitment to “defend digital ownership in gaming.”

Immutable has received a Wells notice from the SEC, the latest in their approach of regulation by enforcement.

We’re ready to do our part, join the companies fighting for crypto, and defend digital ownership in gaming.

Read our full post: https://t.co/uIiLlboJ2N https://t.co/589IfARu7x

— Robbie Ferguson 🅧 | Immutable (@0xferg) October 31, 2024

Ferguson drew parallels between Immutable’s position and those of other companies like Robinhood and OpenSea that have faced similar regulatory challenges.

The timing and manner of the notice delivery raised eyebrows within the industry. Immutable reported that the SEC initially informed them a Wells notice would arrive “within the week,” but instead delivered it “within hours” of their first interaction.

The company criticized what it called the SEC’s “indiscriminate” approach to classifying tokens as securities. Immutable expressed confidence that its IMX token should not be classified as a security, despite the SEC’s broader stance on cryptocurrency tokens.

The rapid escalation from initial contact to Wells Notice issuance prompted Immutable to call for a “robust conversation to clarify facts.”

The company indicated its readiness to challenge the SEC’s enforcement approach if necessary.

This development occurs against a backdrop of increased regulatory activity in the cryptocurrency space under SEC Chair Gary Gensler.

The agency’s aggressive stance has drawn criticism from U.S. policymakers, who argue it creates confusion in the digital asset market.

Some lawmakers have specifically questioned Gensler’s introduction of terms like “crypto asset security,” suggesting it adds uncertainty to an already complex regulatory landscape.

The case has sparked reactions across the crypto industry, with some companies taking more assertive stances against SEC enforcement actions. Recently, Crypto.com responded to its own Wells Notice by filing a lawsuit challenging the commission.

In its statement, Immutable emphasized that a Wells Notice does not automatically lead to formal legal action, though it serves as a clear indicator of the SEC’s enforcement intentions.