A US judge in the Coinbase insider trading case declares that sales of crypto assets on the secondary market are considered securities transactions.
In July 2022, the SEC filed a complaint accusing Ishan Wahi of giving his brother and a friend, Sameer Raman, confidential information about which crypto assets would be supported by Coinbase.
Former Coinbase product manager Ishan Wahi and his brother Nikhil Wahi have reached an agreement with the U.S. Securities and Exchange Commission (SEC) to settle charges stemming from an insider trading scheme involving crypto assets.
According to new court documents, the exchanges between the Wahi brothers and their friend qualify as investment contracts.
“Every issuer continued to make such statements
regarding the profitability of their tokens even when the tokens were traded on secondary markets…
So under Howey [test]were all crypto assets that Ramani bought and traded investment contracts.”
The court issued a default judgment against Ramani for failing to respond to a summons or appear in court. According to the report, Ramani fled the country.
Says the judge,
“In finding as true the allegations in the FAC (First Amended Complaint), the Court finds that: (1) Ramani acted on material non-public information that he knew had been provided to him in violation of Ishan’s duty as Coinbase manager; and (2) Ramani’s misconduct was related to the purchase and sale of securities…
The allegations in the FAC show that the tokens that Ramani traded were offered and sold as investment contracts and therefore as securities.”
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Generated image: Midjourney