Coinbase Manager Slams SEC in Motion to Dismiss Insider Trading Case8. February 2023
• Former Coinbase manager Ishan Wahi and his brother, Nikhil Wahi, are challenging charges of alleged insider trading laid by the Securities and Exchange Commission (SEC).
• Their lawyers argue that the tokens allegedly traded by the pair were not securities as they had no ‘investment contract’ written or implied.
• The lawyers compared the tokens to physical baseball cards, such as those pictured, which can sell for thousands.
Former Coinbase Manager Faces SEC Charges
The Securities and Exchange Commission (SEC) charged former Coinbase employee Ishan Wahi and his brother Nikhil Wahi with insider trading last July. The SEC alleged that the trio made $1.1 million using Ishan’s tips on the timing and names of tokens in upcoming Coinbase listings.
Challenging SEC Charges
On Feb 6th, attorneys representing the brothers filed a motion to dismiss these charges in United States District Court for the Western District of Washington. The lawyers argued that cryptocurrencies allegedly traded by the Wahis did not fit the legal definition of a security as they had no ‘investment contract’ written or implied. They compared them instead to baseball trading cards and beanie babies which do not have any contractual relationship between buyers on secondary markets. Tokens were also all utility tokens with their primary use being on a platform rather than as investment products.
Legal Definition Of A Security
The lawyers outlined how the SEC was “wrong” in its charges highlighting that token developers have “no obligations whatsoever” to buyers on secondary markets making it impossible for there to be an ‘investment contract’. Furthermore, none of these tokens were like stock; instead their object was to facilitate activity on underlying platforms enabling each network to develop and grow.
Comparing Tokens To Baseball Cards
The lawyers argued that token developers have “no obligations whatsoever” to buyers on secondary markets adding: “With zero contractual relationship, there cannot be an ‘investment contract.’ It is that simple.” They then emphasized how these tokens are akin to physical baseball cards which can sell for thousands due their collectible value rather than investment potential.
In conclusion, this motion highlights how ex-Coinbase employee Ishan Wahi and his brother Nikail Wahi are challenging SEC charges of insider trading arguing that cryptocurrencies allegedly traded by them were not securities but rather comparable to baseball trading cards or beanie babies with no contractual relationships between buyers on secondary markets making them unfit for an ‘investment contract’.