SEC Accused of Abuse of Office in Coinbase Case
2023.02.23 03:19
SEC Accused of Abuse of Office in Coinbase Case
By Tiffany Smith
Budrigannews.com – In its insider trading case against former Coinbase employees, the United States Securities and Exchange Commission has once more been accused of overstepping its authority and unfairly labeling crypto assets as securities.
The Chamber of Digital Commerce, which is based in the United States, submitted an amicus brief on February 22 arguing that the case should be dismissed because it aimed to label secondary market transactions as securities transactions and represented an expansion of the SEC’s campaign of “regulation by enforcement.”
The SEC’s attempt to classify these tokens as securities in the context of an enforcement action against third parties who were not involved in the creation, distribution, or marketing of those assets raises serious concerns with us. This is not a good way to make policies. Dismiss! https://t.co/06WAJ65Ckl
The Chamber of Digital Commerce’s founder and CEO Perianne Boring wrote, “This case represents a stealthy, dramatic, and unprecedented effort to expand the SEC’s jurisdictional reach and threatens the health of the U.S. marketplace for digital assets.”
The Chamber noted that Congress never authorized the “SEC’s encroachment into the digital assets market” and that the Supreme Court has previously ruled that Congress must first grant regulators authority.
It posted a tweet that read, “By acting without Congressional authorization, [the SEC] continues to contribute to a chaotic regulatory environment, causing harm to the very investors it is charged with protecting.”
The Chamber also argued that the SEC was essentially asking the court to uphold that secondary market trades in the nine digital assets mentioned in an insider trading case against a former Coinbase employee constitute securities transactions by bringing claims of securities fraud. This was deemed to be “problematic” by the Chamber.
@SECGov’s novel attempt to impose securities regulations through the “back door” of an insider trading action raises serious concerns about due process and will have a variety of negative effects on investors and digital assets. As a result, it ought to be ignored!
Perianne went on to say, “We have serious concerns about [the SEC’s] attempt to label these tokens as securities in the context of an enforcement action against third parties who had nothing to do with creating, distributing, or marketing those assets.” This was said in reference to an enforcement action against third parties.
In its brief, the Chamber referred to the LBRY v. SEC case, in which the judge ruled that transactions on the secondary market would not be classified as securities transactions.
A paper from commercial contract attorney Lewis Cohen convinced the judge that since the landmark SEC v. W. J. Howey Co. decision, which established the standard for determining whether a security transaction exists, no court had ever acknowledged that the underlying asset was a security.
The Blockchain Association filed a similar amicus brief on Feb. 13, arguing that the SEC had exceeded its authority in the case and that it was “the latest salvo in the SEC’s apparent ongoing strategy of regulation by enforcement in the digital assets space.” The latest amicus brief follows that filing.
An amicus curiae, or “friend of the court,” is a person or organization who is not involved in a case but can help the court by providing pertinent information or insight. An amicus curiae files an amicus brief.
In July, the SEC filed a lawsuit against Ishan Wahi, a former product manager at Coinbase Global, his brother Nikhil Wahi, and a friend named Sameer Ramani. The suit claimed that the trio had used Ishan’s confidential information to make gains of $1.5 million from trading 25 different cryptocurrencies.
