Lawyers representing the former product manager at Coinbase, Ishan Wahi, have filed the motion to dismiss the charges of insider trading imposed on Wahi.

Former Coinbase Manager Moves to Dismiss Charges of Insider Trading

  • Lawyers representing the former product manager at Coinbase, Ishan Wahi, have filed the motion to dismiss the charges of insider trading imposed on Wahi.
  • They claim that the crypto coins that were traded were not securities, and as a result, the SEC should dismiss the case. 
  • The motion states that the case against Wahi “involves standalone digital tokens purchased over exchanges,” which are not part of any “common enterprise.”
  • The SEC alleges that Wahi shared crucial information about the listing of certain crypto coins with his brother and a friend who made $1.2 million from the info.

Coinbase, the largest crypto exchange in the United States, has faced a lot of downside in its value in the 2022 crypto market crash, and some employees at the exchange even faced allegations of engaging in insider trading. However, a former product manager at the exchange has moved to dismiss these allegations, which were imposed by the US Securities and Exchange Commission (SEC). 

It is crucial to note that the former product manager at Coinbase crypto exchange, Ishan Wahi, has slammed the SEC for charges involving insider trading. According to the lawyers representing the ex-employee of the exchange, the crypto coins that were traded were not securities, and as a result, the SEC should dismiss the case. 

The motion to dismiss the charges imposed by the SEC was filed on Feb. 6 in the United States District Court for the Western District of Washington. It is crucial to note here that on July 20, 2022, the prosecutors for the Southern District of New York (SDNY) along with the United States Securities and Exchange Commission (SEC) charged Coinbase product manager Ishan Wahi, along with Nikhil Wahi (Ishan’s brother), and Sameer Ramani (a friend), in the first insider trading case of the crypto industry. 

The SEC alleges that Ishan Wahi shared crucial information about the listing of certain crypto coins with his brother and Ramani, which led to them making $1.2 million in profits while trading these tokens. Interestingly, the lawyers noted in the brief that “the legal deficiencies in the SEC’s amended complaint are serious, and the Court should not allow the Agency’s [SEC’s] brute-force approach to obscure them.” 

The lawyers note that the SEC claims that each of the cryptocurrencies that the Coinbase employee’s brother and friend traded constitutes an “investment contract” and thus can be considered a security.

“The SEC is wrong. The term “investment contract” requires—as the statute says—a contract. But here there are no contracts, written or implied. The developers who created the tokens at issue have no obligations whatsoever to purchasers who later bought those tokens on the secondary market. And with zero contractual relationship, there cannot be an “investment contract.” It is that simple,” argued the lawyers representing the former Coinbase employee in the motion. 

The motion added that even if there were “investment contracts,” the SEC’s complaint still fails because the regulator states that there is an “investment contract” whenever a person is “led to invest money in a common enterprise with the expectation that they would earn a profit solely through the efforts of the promoter or of some one other than themselves.”

Wahi’s lawyers added that the SEC’s case against their client “involves standalone digital tokens purchased over exchanges,” and such token-buyers are not part of any “common enterprise.” Moreover, the former Coinbase employees’ lawyers also stated that these cryptocurrencies were all utility tokens, i.e., their major goal was to serve as tokens for a platform and not for investment purposes. 

“None of the tokens were like stock […] The very object of each token was to facilitate activity on the underlying platforms and, in so doing, enable each network to develop and grow.”

As reported, Coinbase laid off over 900 employees and also suffered losses in three consecutive quarters in 2022. It will be interesting to see what the future has in store for the exchange, as it recently suspended creator Drops on its NFT platform and, as per an earlier report from BitcoinWisdom, it also terminated services in Japan.

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Parth Dubey Verified

A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.

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