Default Ruling Entered by U.S. Judge Against Ex Coinbase Insider, Affirming Secondary Market Sales as Securities Transactions

Crypto News– In a recent insider trading case involving Ishan Wahi, former product manager at Coinbase, along with his brother Nikhil Wahi and their friend Sameer Ramani, a U.S. court issued a ruling on March 1. The court determined that the trading of specific crypto assets on the secondary market, including those on Coinbase, constitutes securities transactions.

Default Ruling Entered by U.S. Judge Against Ex Coinbase Insider, Affirming Secondary Market Sales as Securities Transactions

The court’s decision, articulated in a default judgment against Ramani, emphasized that even when Ramani traded tokens on the secondary market, the analysis remained consistent. The court argued that the representations made by the issuers regarding the profitability of their tokens persisted, aligning with the Howey test and classifying all crypto assets traded by Ramani as investment contracts.

The default judgment was issued because Ramani failed to respond to a court summons or appear in court. Back in May 2023, the SEC had already settled charges with Ishan Wahi and Nikhil Wahi in what was described as the “first-ever insider trading case involving cryptocurrency markets.”

This ruling carries added significance as it contradicts the crypto industry’s and Coinbase’s stance that cryptocurrencies are not securities and, therefore, should not fall under the SEC’s jurisdiction. SEC Chair Gary Gensler has consistently argued that most cryptocurrencies meet the definition of securities, urging crypto exchanges to register with the SEC.

Notably, this case is not the first instance where a U.S. court has deliberated on whether the sales of specific cryptocurrencies should be classified as unregistered securities, irrespective of whether they occur on secondary platforms like exchanges. In a precedent-setting decision in July, Federal District Judge Analisa Torres ruled that although Ripple violated federal securities laws in selling XRP to institutional investors directly, it did not do so by making XRP available to retail customers through programmatic sales to exchanges.