Former Coinbase manager slams SEC in motion to dismiss insider trading case

A erstwhile merchandise manager astatine cryptocurrency speech Coinbase has moved to disregard charges of alleged insider trading, with his lawyers arguing the tokens helium allegedly traded were not securities.

Lawyers representing ex-Coinbase employee, Ishan Wahi, and his brother, Nikhil Wahi, filed a motion connected Feb. 6 successful the United States District Court for the Western District of Washington to disregard charges laid b the Securities and Exchange Commission (SEC).

In July past year, the SEC charged the brothers and their associate, Sameer Ramani, with insider trading alleging the trio made $1.1 cardinal utilizing Ishan’s tips connected the timing and names of tokens successful upcoming Coinbase listings.

In an implicit 80-page document, the lawyers outlined however the SEC was “wrong” successful its charges.

They argued the cryptocurrencies allegedly traded by the Wahi’s did not acceptable the ineligible explanation of a information arsenic they had nary “investment declaration [...] Written oregon implied” and compared them alternatively to shot trading cards and beanie babies.

Lawyers for the Wahi brothers argued the tokens allegedly purchased by the brace are akin to carnal shot cards, specified arsenic those pictured, which tin merchantability for thousands. Image: Twitter

They backed their statement further saying token developers person “no obligations whatsoever” to buyers connected the secondary markets, adding:

“With zero contractual relationship, determination cannot beryllium an ‘investment contract.’ It is that simple.”

The tokens, the lawyers argued, were besides each inferior tokens and emphasized their superior usage is connected a level alternatively than utilized arsenic an concern product.

“None of the tokens were similar banal [...] The precise entity of each token was to facilitate enactment connected the underlying platforms and, successful truthful doing, alteration each web to make and grow.”

The Wahi brothers and Ramani purportedly purchased astatine slightest 25 cryptocurrencies earlier the Coinbase listings — of which astatine slightest 9 the SEC asserts to beryllium securities — earlier selling them for a nett soon aft their listing.

Lawyers slam SEC for regulatory muscling

The Wahi’s lawyers lambasted the SEC for its evident effort astatine “trying to prehend wide regulatory jurisdiction implicit a monolithic caller manufacture via an enforcement action.”

They said the regulator “lacks wide legislature authorization to deem the tokens astatine contented to beryllium ‘securities,’” and added:

“If the SEC truly believes integer assets are securities, it should prosecute successful a rulemaking oregon different nationalist proceeding explicating that presumption and providing guidance to regulated parties connected its implications.”

Commodity Futures Trading Commission (CFTC) commissioner, Caroline Pham, has previously expressed concern astatine the imaginable “broad implications” of the case.

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She said the SEC’s actions don’t code the question of if immoderate cryptocurrencies are securities done a “transparent” process that develops “appropriate argumentation with adept input.”

The Wahi brothers and Ramani also faced charges from the U.S. Attorney’s Office for the Southern District of New York relating to ligament fraud and ligament fraud conspiracy.

Ishan Wahi and his ineligible squad astatine Jones Day filed a beardown question to disregard successful the SEC's enforcement enactment regarding alleged insider trading of 9 tokens. https://t.co/s4WZuZThAp pic.twitter.com/kFJjYvdyJc

— Marisa Tashman Coppel (@mtcoppel) February 7, 2023

Nikhil pleaded guilty to the charges and was sentenced to 10 months successful prison for ligament fraud conspiracy successful January. Ishan pleaded not guilty to the charges successful August 2022. Ramani seemingly remains astatine large.

The question was signed by 10 attorneys from 5 abstracted instrumentality firms.

If the question to disregard is denied by District Judge Tana Lin, the lawsuit volition continue.