Ishan Wahi, who used to work at Coinbase, and his brother Nikhil Wahi, have settled insider trading charges with the Securities and Exchange Commission (SEC). They were accused of using confidential information about new cryptocurrencies being added to Coinbase to make money.
Ishan Wahi used to help Coinbase announce what new cryptocurrencies would be added for trading. This information was supposed to be confidential, and Coinbase told its workers not to use it to make trades or tell other people. But the SEC says that Ishan told his brother Nikhil and his friend Sameer Ramani about when these announcements would happen from June 2021 to April 2022. Nikhil and Sameer then bought these cryptocurrencies before the announcements, which usually made their prices go up, and sold them afterward for a profit.
Regulation and Enforcement: The SEC Steps In
The SEC’s stance is clear: the federal securities laws apply to crypto asset securities as much as they do to traditional securities.
“While the technologies at issue in this case may be new, the conduct is not. We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The SEC’s complaint, which was filed on July 21, 2022, in the U.S. District Court for the Western District of Washington, led to the settlement where the Wahi brothers agreed not to deny the SEC’s allegations.
The Criminal Case and Final Judgments
Following the insider trading charges, the Wahi brothers also faced criminal action. They pled guilty to conspiracy to commit wire fraud, with Ishan Wahi receiving a sentence of 24 months in prison and an order to forfeit 10.97 ether and 9,440 Tether. Nikhil was sentenced to 10 months in prison and ordered to forfeit $892,500. The SEC has decided not to ask for more money because the brothers have been sentenced to jail.
The Unsettled Questions
This SEC settlement brings up a few big questions. Why didn’t they say if tokens are securities or not? Could it be because they’re not sure how to classify them? Are they still trying to figure out their position or are they just hesitant to apply old rules to these new kinds of assets? Only time will tell!
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