SEC Dismisses Insider Trading Case
2023.02.07 04:22
SEC Dismisses Insider Trading Case
By Kristina Sobol
Budrigannews.com – His attorneys argued that the tokens he allegedly traded were not securities, and as a result, the charges of alleged insider trading against him have been moved to dismiss. The former product manager of cryptocurrency exchange Coinbase.
On February 6, attorneys for Ishan Wahi, an ex-Coinbase employee, and his brother, Nikhil Wahi, filed a motion to dismiss charges brought by the Securities and Exchange Commission (SEC) in the United States District Court for the Western District of Washington.
In July last year, the SEC charged the siblings and their partner, Sameer Ramani, with insider exchanging asserting the triplet made $1.1 million utilizing Ishan’s tips on the timing and names of tokens in forthcoming Coinbase postings.
The attorneys explained why the SEC’s charges were “wrong” in a document that was more than 80 pages long.
They compared the cryptocurrencies allegedly traded by the Wahi’s to baseball trading cards and beanie babies, arguing that because they did not have an “investment contract […] Written or implied,” they did not meet the legal definition of a security.
The Wahi brothers’ attorneys argued that the tokens the brothers allegedly purchased are comparable to physical baseball cards, such as the ones depicted, which can fetch thousands of dollars. Image: Twitter They added that token developers have “no obligations whatsoever” to buyers on the secondary market, bolstering their argument further:
An “investment contract” cannot exist if there is no contractual relationship. It’s that easy.”
The lawyers argued that all of the tokens were utility tokens and that their primary function was on a platform rather than as an investment product.
“None of the tokens were like stock […] The very purpose of each token was to facilitate activity on the underlying platforms and, as a result, to enable each network to develop and grow,” the statement read.
Before Coinbase’s listing, the Wahi brothers and Ramani are said to have bought at least 25 cryptocurrencies, nine of which the SEC claims to be securities, and then sold them for a profit shortly after.
The Wahi’s lawyers criticized the SEC’s apparent attempt to “try to seize broad regulatory jurisdiction over a massive new industry via an enforcement action” for their client’s losses.
They added that the regulator “lacks clear congressional authorization to deem the tokens at issue to be’securities'” and that the following:
“The SEC should engage in a rulemaking or other public proceeding to explain that view and provide guidance to regulated parties on its implications if the SEC really believes digital assets are securities.”
Caroline Pham, commissioner of the Commodity Futures Trading Commission (CFTC), has previously voiced concern regarding the case’s potential “broad implications.”
She asserted that the SEC’s actions do not address the issue of whether certain cryptocurrencies are securities through a “transparent” procedure that creates “appropriate policy with expert input.”
The U.S. Attorney’s Office for the Southern District of New York also brought charges against Ramani and the Wahi brothers for wire fraud and conspiracy to commit wire fraud.
In the SEC’s enforcement action regarding alleged insider trading of 9 tokens, Ishan Wahi and his Jones Day legal team filed a strong motion to dismiss.
In January, Nikhil received a sentence of ten months in prison for wire fraud conspiracy after pleading guilty to the charges. In August 2022, Ishan pleaded not guilty to the charges. Ramani appears to be still at large.
Ten attorneys from five distinct law firms signed the motion.
The case will continue if District Judge Tana Lin denies the motion to dismiss.
