Court rules ‘certain’ crypto as securities in Coinbase insider trading case
A judge in the United States has stated that particular types of cryptocurrency that are bought and sold on alternative markets are considered to be securities.
The decision was made as a result of a lawsuit regarding insider trading that featured Ishan Wahi, a previous product manager at Coinbase, along with his brother Nikhil Wahi and their companion Sameer Ramani.
The three individuals were charged with engaging in unlawful trading of cryptocurrency assets using sensitive information. Ramani made a total of $817,602 in profits as a result of their illegal actions.
The situation, originally introduced by the SEC in the United States, centered around the unlawful trading of tokens by the three individuals. This was based on insider information that Ishan Wahi had access to.
Ramani, who hasn't been caught yet, received a default ruling from the court on March 1. The ruling classified the cryptocurrencies in question as securities according to the Howey Test. The Howey Test checks whether a transaction constitutes an "investment contract" and, therefore, a security. It does this by examining if there was an investment of money in a joint venture with the primary anticipation of profit from the labor of someone else.
The ruling from the court is in line with the SEC's general attitude towards digital assets. This has resulted in the SEC taking action against other groups, including the LBRY team who conceded their case back in October 2023. The decision could have a significant impact on how cryptocurrencies are handled in a variety of secondary markets, potentially affecting their trade on centralized crypto exchanges. It might even set the standard for future cases involving digital assets.
Paul Grewal, who serves as the Chief Legal Officer at Coinbase, addressed the recent ruling on social media. In his response, he made the argument that default judgments don't carry much weight as legal precedent since they aren't challenged. He added that the judge only takes into account the filings submitted by the SEC.
Grewal expressed dissatisfaction with the SEC's method of taking legal action against those who are not present in court and those who act as intermediaries. He suggested that such a method overlooks individuals who possess vital information that could challenge the SEC's arguments.
