In an absentee decision in the case of insider trading on Coinbase, a US court ruled that trading certain crypto assets on secondary markets is securities transactions.
In July 2022, authorities arrested the exchange's former product manager Ishan Wahi and his brother Nikhil. They were accused of fraud using insider trading. Samir Ramani, a close friend of the former Coinbase manager, also became a defendant in the case.
In early 2023, the brothers pleaded guilty, and in May settled the claims of the US Securities and Exchange Commission (SEC).
In relation to Ramani, the agency initiated an absentee review of the case. The court agreed, stating in the decision that the accused "seems to have fled the country to avoid criminal prosecution."
Regarding the tokens that Ramani traded using information from Ishan Wahi, the court sided with the SEC, recognizing them as securities.
According to the statement, asset issuers attracted investors with potential profits. The projects promoted proposals through social networks, including with claims that:
* the cost of coins will increase;
* owners will be able to receive additional rewards and other benefits;
* teams take steps to increase the value of coins, including limiting the market supply.
"Each issuer continued to make such statements regarding the profitability of their tokens, even when they were trading on secondary markets. Thus, according to Howey's [test], all the crypto assets that Ramani bought and sold were investment contracts," Judge Tana Lin ruled.
This is not the first time that the classification of virtual assets promoted by SEC Chairman Gary Gensler has been approved by the court. The head of the department has repeatedly stated that almost all cryptocurrencies are securities.
• Source: https://www.courtlistener.com/docket/63887980/119/securities-and-exchange-commission-v-wahi/
Judges in the United States have not yet come to a common opinion
In July 2023, Judge Analisa Torres ruled that programmatic sales and other distributions of Ripple's XRP token do not constitute the offering and implementation of investment contracts. However, according to the decision, the sale of coins to large players violated US securities laws.
In December, Judge Jed Rakoff, the lead judge in the SEC's lawsuit against Terraform Labs, rejected Torres ' approach. In his opinion, the company offered and sold securities in the form of UST, LUNA, wLUNA and MIR tokens. The defendants tried to appeal to the precedent, but Rakoff found their arguments unconvincing.
Prior to this, former SEC lawyer John Reed Stark called Torres ' verdict in the case against Ripple "based on shaky ground." He assessed as high the chances of a successful appeal against it in higher instances.
Since March 2023, the Commission has filed civil lawsuits, which included charges of unregistered offering of investment contracts in the form of cryptocurrencies, against a number of exchanges like Beaxy, Bittrex, Binance and Coinbase. In November, the regulator made claims against Kraken.
In a motion to dismiss the claim, the bitcoin exchange stated that the agency cannot reasonably claim that digital tokens traded on the platform are securities.
"Instead of identifying the securities, the complaint asks the court to support the theory that an investment contract can exist without a contract, without after — sales obligations, or even without interaction between the issuer and the buyer," said Kraken CEO Dave Ripley.
In August, the SEC, as part of its enforcement actions against Impact Theory, first classified NFTs as investment contracts. The firm pleaded guilty, agreed to pay $6.1 million in fines and interest, destroy the remaining tokens in its possession, and waive all royalties.
In relation to Ramani, the court ordered him to return the income illegally obtained on insider trading in the amount of $817,602, as well as to pay a fine of $1.6 million. Judge Lin rejected the Commission's request to impose interest on the refund.
In July 2022, authorities arrested the exchange's former product manager Ishan Wahi and his brother Nikhil. They were accused of fraud using insider trading. Samir Ramani, a close friend of the former Coinbase manager, also became a defendant in the case.
In early 2023, the brothers pleaded guilty, and in May settled the claims of the US Securities and Exchange Commission (SEC).
In relation to Ramani, the agency initiated an absentee review of the case. The court agreed, stating in the decision that the accused "seems to have fled the country to avoid criminal prosecution."
Regarding the tokens that Ramani traded using information from Ishan Wahi, the court sided with the SEC, recognizing them as securities.
According to the statement, asset issuers attracted investors with potential profits. The projects promoted proposals through social networks, including with claims that:
* the cost of coins will increase;
* owners will be able to receive additional rewards and other benefits;
* teams take steps to increase the value of coins, including limiting the market supply.
"Each issuer continued to make such statements regarding the profitability of their tokens, even when they were trading on secondary markets. Thus, according to Howey's [test], all the crypto assets that Ramani bought and sold were investment contracts," Judge Tana Lin ruled.
This is not the first time that the classification of virtual assets promoted by SEC Chairman Gary Gensler has been approved by the court. The head of the department has repeatedly stated that almost all cryptocurrencies are securities.
• Source: https://www.courtlistener.com/docket/63887980/119/securities-and-exchange-commission-v-wahi/
Judges in the United States have not yet come to a common opinion
In July 2023, Judge Analisa Torres ruled that programmatic sales and other distributions of Ripple's XRP token do not constitute the offering and implementation of investment contracts. However, according to the decision, the sale of coins to large players violated US securities laws.
In December, Judge Jed Rakoff, the lead judge in the SEC's lawsuit against Terraform Labs, rejected Torres ' approach. In his opinion, the company offered and sold securities in the form of UST, LUNA, wLUNA and MIR tokens. The defendants tried to appeal to the precedent, but Rakoff found their arguments unconvincing.
Prior to this, former SEC lawyer John Reed Stark called Torres ' verdict in the case against Ripple "based on shaky ground." He assessed as high the chances of a successful appeal against it in higher instances.
Since March 2023, the Commission has filed civil lawsuits, which included charges of unregistered offering of investment contracts in the form of cryptocurrencies, against a number of exchanges like Beaxy, Bittrex, Binance and Coinbase. In November, the regulator made claims against Kraken.
In a motion to dismiss the claim, the bitcoin exchange stated that the agency cannot reasonably claim that digital tokens traded on the platform are securities.
"Instead of identifying the securities, the complaint asks the court to support the theory that an investment contract can exist without a contract, without after — sales obligations, or even without interaction between the issuer and the buyer," said Kraken CEO Dave Ripley.
In August, the SEC, as part of its enforcement actions against Impact Theory, first classified NFTs as investment contracts. The firm pleaded guilty, agreed to pay $6.1 million in fines and interest, destroy the remaining tokens in its possession, and waive all royalties.
In relation to Ramani, the court ordered him to return the income illegally obtained on insider trading in the amount of $817,602, as well as to pay a fine of $1.6 million. Judge Lin rejected the Commission's request to impose interest on the refund.
