Former Coinbase Executive Challenges Insider Trading Charges By SEC

By Bitcoinist - 1 month ago - Reading Time: 3 minutes

Former Coinbase Executive Challenges Insider Trading Charges By SEC

In the latest update regarding the SEC’s insider trading charges against the former Coinbase Manager Ishan Wahi, the defendant requested the court to dismiss the case. According to the recent filing, the defendants, Ishan and Nikhil Wahi, argued that the SEC’s charges were wrong. 

In the filing, counsel representing the former Coinbase employees said the cryptocurrencies that the two brothers traded were not securities.

Details Of The SEC Against Coinbase Executive Case

On July 21, 2022, the US Securities and Exchanges Commission filed insider trading charges against Ishan Wahi, a former Coinbase manager, and his brother Nikhil Wahi at the District Court for the Western District of Washington. 

As per the SEC’s argument, Ishan tipped his brother Nikhil and friend Sameer Ramani with information about the names and timing of Coinbase’s upcoming token listings.

The filing also noted that Ishan communicated via phone calls and text messages using a non-US phone number, so the US phone company record could not capture the conversation. The SEC further alleged that the trio made $1.1 million using Ishan’s tips. 

The watchdog argued that Wahi and Ramani bought 25 cryptocurrencies before their official listing on Coinbase and sold them for a profit shortly after the listing. Also, the SEC alleged that at least nine of the cryptocurrencies are securities.

In an over 80-page recent filing, Wahi’s lawyer highlighted several reasons for implying that the Commission is wrong in its charges. First, the tokens in question are not securities since they lack an investment contract.  

They further argued that the token developers have no obligation to buyers on the secondary markets, adding that an investment contract cannot exist without a contractual relationship.

Furthermore, Ishan’s lawyers noted that all the listings were utility tokens, emphasizing that their primary use was to promote activity on a platform and not as investment products. 

Lawyers Slam SEC For Enforcement Actions Without Clear Regulatory Authorization

The defendants’ lawyers scolded the SEC for several attempts to take over regulatory oversight of the young cryptocurrency industry via enforcement actions. In their words, the watchdog lacks explicit congressional authorization to define the tokens at issue as securities. 

According to them, the SEC should conduct a rulemaking or public proceeding explicating their views if they believe digital assets to be securities. Also, they advised the SEC to guide the parties they want to regulate on the implications of offering and trading securities instead of jumping into enforcement actions out of nowhere.

Before now, Caroline Pham, Commissioner of the US Commodity Futures Trading Commission, expressed concerns over the possible implications of the SEC’s case against Ishan Wahis on July 21, 2022. According to Pham, the SEC can only achieve regulatory clarity through a transparent and expert-supported process. 

The Wahis and Ramani also faced charges by the US Attorney’s office for the Southern District of New York. On Thursday, July 21, 2022, the Department of Justice announced that the US Attorney and the Federal Bureau of Investigation filed an indictment charge against Ishan Wahi, Nakhil Wahi, and Sameer Ramani for wire fraud conspiracy and a scheme to commit insider trading in crypto assets using Coinbase confidential information.

Meanwhile,  Nikhil pleaded guilty to the charges in September and received a 10-month sentence in prison for wire fraud conspiracy on January 10. His brother Ishan pleaded not guilty in August while Ramani remains on the run.

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Original source: Bitcoinist