Cryptocurrency platform Coinbase Global Inc (NASDAQ:COIN) announced it received a Wells Notice from the U.S. Securities and Exchange Commission (SEC). The announcement came Wednesday after the market close, which sent shares down.

The company’s co-founder and CEO Brian Armstrong defended the company, but some have pointed to questionable timing of sales by the company’s leader.

What Happened: Coinbase revealed it received a Wells Notice from the SEC that could target several company products like its spot trading market, staking service and others.

A Wells Notice often precedes an investigation or changes requested by regulators.

Shares of Coinbase were down significantly in after-hours trading Wednesday and analysts see more potential downside ahead depending on the official details from the SEC.

Armstrong defended his company against the SEC regulatory concerns Wednesday.

“We are right on the law, confident in the facts, and look forward to sharing our story,” Armstrong tweeted.

Armstrong defended the company and called for regulators to be clearer in what is demanded to be changed, a call out that happens after Armstrong said it met with the SEC 30 times in the last nine months.

Armstrong also defended the company’s approval to go public in April 2021 with an S1 filing that included references to staking, one of the key areas now targeted by regulators.

“Going forward the legal process will provide an open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”

Related Link: Coinbase Q4 Results And Guidance 'Encouraging' But Regulatory Risks Remain: Why Analysts Are Mixed On Ratings, Price Targets

Armstrong Insider Sales: The mention of Coinbase meeting with regulators over the last nine months could spark some concern from investors as Armstrong has been selling millions of dollars in shares in 2023.

The Benzinga Insider Trades page for Coinbase shows that Armstrong has exercised stock options and sold $17,967,700 in shares of Coinbase since the start of 2023.

The insider sales included the following filing dates and sale proceeds:

• Jan. 6: $547.7 thousand
• Jan. 18: $4.55 million
• Feb. 1: $1.74 million
• Feb. 6: $3.54 million
• Feb. 16: $1.72 million
• March 3: $1.92 million
• March 15: $1.71 million
• March 21: $2.24 million

The transactions were all done by the Brian Armstrong Living Trust and may have been part of prearranged sales by the CEO.

The most recent filing from March 21 saw Armstrong sell shares on March 17 and March 20.

After the most recent sale, Armstrong remained one of the largest shareholders of the company, with the following stakes:

• Brian Armstrong Living Trust: 26,204,293 shares
• Brian Armstrong Grantor Retained Annuity Trust: 6,159,583 shares
• The Ehrsam 2014 Irrevocable Trust: 950,490 shares

Coinbase’s Chief Legal Officer Paul Grewal has also made several insider sales during 2023. One insider who has been buying shares of Coinbase is Tobias Lutke, the CEO of Shopify, who was named to the Coinbase Board of Directors in 2022.

The sales by Armstong also may not come as a surprise to people who follow him on Twitter, where he announced in October 2022 that he wanted to sell 2% of his holdings to help fund other ventures.

“I’m passionate about accelerating science and tech to help solve some of the biggest challenges in the world. To further this, I’m planning to sell about 2% of my Coinbase holdings over the next year to fund scientific research,” Armstrong tweeted.

Armstrong said he intended to be the CEO of the company for a long time and remained bullish on crypto and Coinbase despite the sales.

“I’m fully dedicated to growing our business and advocating our mission, but I am also excited to contribute in a different way.”

COIN Price Action: Coinbase shares are down 11.39% to $68.35 on Thursday versus a 52-week trading range of $31.55 to $206.79.

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