The SEC has filed a case against a former Coinbase product manager, his brother and one of his close associate, alleging that the trio raked $1.5 million in profits from insider trading.
In a separate complaint filed on 21st July, the apex regulator said that nine of the 25 tokens allegedly traded in the scheme were securities, sparking a huge debate online.
According to Ian McGinley who works as a partner at a law firm stated that the financial watchdog would now have to prove the alleged tokens are in fact securities.
“They don’t have a wire fraud statute as the DOJ does,” McGinley said, referring to wire fraud charges brought by the U.S. Department of Justice on the same date.
The charges were issued to Ishan Wahi, a former product manager at Coinbase, engaged in wire fraud and conspiracy to commit wire fraud.
Further, the charges alleges that Wahi shared confidential Coinbase information to his brother Nikil Wahi and associate Sameer Ramani about which digital tokens were scheduled to be listed on the crypto trading platform.
SEC taking on individual actors rather than token issuers- Expert
Some in the industry feel the regulator is unlikely to move court against Coinbase, which has the means and the resources to pursue litigation against the former.
It still put Coinbase on notice that the SEC views these tokens as securities which on conviction would pressurize trading platforms to delist these tokens.
Although such a scenario would not be legally binding on the token issuers or Coinbase or other exchanges, the agency can leverage this decision against its more challenging enforcement targets.
Echoing similar sentiment, Joshua Rivera, General Counsel, Blockchain Capital expressed concern,
In an alarming strategy, the Commission directly pursues only the individual actors (as opposed to Coinbase and the token issuers) who lack the resources and the motivation to litigate the securities laws implications of the case. The SEC can expect an easy win and a federal opinion (or settlement) in fact, which the they can then leverage against its more challenging enforcement targets.