Ishan Wahi, a former product manager at Coinbase, and his brother were accused in the SEC lawsuit of using inside information to trade securities backed by digital assets.
The United States Securities and Exchange Commission (SEC) filed allegations of insider trading against Ishan Wahi, a former Coinbase product manager, and his brother Nikhil Wahi, the agency stated on May 30. In the Western District of Washington U.S. District Court, the SEC has submitted an application for final judgment.
The brothers were charged with exploiting information about “at least” nine cryptocurrency assets that would eventually be published on Coinbase to make purchases prior to listing. On July 21, 2022, the SEC filed a lawsuit against them. The disgorgement of illegally obtained gains is now being demanded by that agency with interest.
Gurbir Grewal, Director of SEC Division of Enforcement, issued the following statement:
“The technologies at issue in the present case may be new, but the conduct is not. Crypto asset securities are not exempt from the federal securities laws’ prohibition on insider trading, and neither does the SEC.
The U.S. District Court for the Southern District of New York sentenced Ishan Wahi to 24 months in jail on May 9, and the SEC declared in April that it had struck “an agreement in principle” with him. Wahi had profited up to $1.5 million at the time through unlawful trading, it was discovered. The same court sentenced Nikhil Wahi to 10 months in prison in January.
According to the SEC’s lawsuit, Sameer Ramani and the Wahis traded in “crypto asset securities.” The claim generated quite a bit of debate, and U.S. Commodity Futures Trading Commission Commissioner Caroline Pham cautioned that the classification of tokens “that could be referred to as utility tokens and/or certain tokens associated with decentralized autonomous organizations (DAOs)” could “have implications beyond this single case.” .” The SEC’s approach was described by Pham as “regulation by enforcement.”
Wahi pled guilty to DOJ charges and settled, but strongly contested SEC charges@paradigm filed a brief supporting Wahi's defense against SEC, arguing the tokens could not be deemed securities even if they were initially sold in securities transactionshttps://t.co/sTan1tHNYn
— Rodrigo (@RSSH273) May 30, 2023
Additionally, the case prompted a number of amicus filings.
The Wahis requested that the lawsuit be dismissed in February, claiming that the SEC misclassified the tokens at issue in the case based on the Howey test and the substantial questions doctrine. The validity of the SEC’s claims will not be decided if the settlement is accepted.
The settlement is still awaiting court clearance.