In the latest development to the Coinbase insider trading case, the exchange’s former product manager Ishan Wahi and brother Nikhil Wahi have agreed to settle charges that were brought against them by the United States Securities and Exchange Commission (SEC).
In a press release on Tuesday, May 30th, the US SEC announced that the Wahi brothers agreed to settle civil charges “that they engaged in insider trading through a scheme to trade ahead of multiple announcements regarding at least nine crypto asset securities that would be made available for trading on the Coinbase platform.”
Wahi Pled Guilty DOJ Charges, But Contested SEC
Blockchain Journal reported that Ishan Wahi was sentenced to 24 months in prison on May 9th over charges brought against him by the US Department of Justice(DOJ). According to the charges, during his time at Coinbase as a product manager between October 2020 and April 2022, Ishan leaked assets listing information to his brother Nikhil Wahi and friend Sameer Ramani in advance of listing so that they could secretly engage in profitable trades.
The trio racked up $1.5 million by trading 55 digital assets, said the DOJ complaint. He and his brother both pled guilty to the DOJ charges and were sentenced to 24 months and 10 months in prison. Sameer Ramani was and still is at large.
The US SEC had also filed a case against the Wahi brothers for potential violations of securities laws. According to the securities regulator, “Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements for a profit.”
Interestingly, while Wahis pled guilty to DOJ charges, they filed a motion in February 2023 to dismiss the SEC charges claiming that the regulator had wrongly classified the digital assets in question as ‘securities.’ Coinbase and Paradigm also filed amicus briefs to support their motion, given the implications of the SEC claims for the future of the assets in question.
Even before that, on July 21st, 2022, the day SEC filed a complaint against Wahis and his associate, the US Commodity Futures Trading Commission (CFTC) Commissioner Caroline Pham called SEC actions “regulation by enforcement” and warned that classifying digital assets, “including those that could be described as utility tokens and/or certain tokens relating to decentralized autonomous organizations (DAOs)” as securities “could have broad implications beyond this single case.”
The settlement is now subject to court approval. A Paradigm’s legal representative notes that the settlement means that SEC has backed down from its claims of securities status of tokens.
