New ruling in SEC’s Coinbase insider trading lawsuit comes as a blow to the crypto industry as judge finds secondary token sales were securities
As the legal debate continues over whether sales of cryptocurrencies constitute securities, all eyes have been on a court case involving a Coinbase employee sharing insider information with his brother and a friend. While the main defendant, former Coinbase employee Ishan Wahi, and his brother have reached settlements with both the Department of Justice and the Securities and Exchange Commission, the friend—Sameer Ramani—remains at large.
On Friday, a federal judge in the Western District Court of Washington issued a ruling in the case against Ramani. The ruling, which agreed in part to the SEC's request for a default judgment, could have serious implications for both Ramani and the broader crypto industry.
"The Court’s analysis remains the same even to the extent Ramani traded tokens on the secondary market," Lin wrote, arguing that the promotional statements apply equally to tokens bought by an investor, whether directly from an issuer or on a trading platform. "Each issuer continued to make such representation regarding the profitability of their tokens even as the tokens were traded on secondary markets."
In the decision, Judge Tana Lin ruled that the case fell under the SEC's jurisdiction because the crypto assets at issue were securities, even though they were traded on Coinbase, a secondary market. As courts grapple with the question of when crypto assets are securities, the decision is the strongest decision yet by a federal judge to support Chair Gary Gensler's argument that the vast majority of the industry's activity falls under its remit.
