Ex-Coinbase Employee Moves To Dismiss Insider Trading Case

The SEC is using a “brute-force approach” to obscure legal deficiencies in its complaint against them,” counsel for the Wahi brothers said


Blockworks exclusive artwork by Axel Rangel, modified by Blockworks


Former Coinbase product manager Ishan Wahi and his brother are looking to get the insider trading charges leveled against them dropped, as their lawyers argue they did not have the “culpable state of mind necessary to commit securities fraud.”

A court filing released Tuesday showed lawyers arguing that the Securities and Exchange Commission (SEC) is trying to gain regulatory jurisdiction over the crypto industry via the enforcement action against the former Coinbase employee and his 26-year-old “kid brother.” 

The SEC’s complaint alleges that the Wahis illegally traded “securities” under the Exchange Act, but cryptoassets cannot be deemed securities as they are not “investment contracts,” the lawyers said. As per the Howey Test, an asset can be classified as a security if it is determined to be an investment contract.

“But here there are no contracts, written or implied,” they wrote. “The developers who created the tokens at issue have no obligations whatsoever to purchasers who later bought those tokens on the secondary market. And with zero contractual relationship, there cannot be an “investment contract.” 

The Coinbase insider trading case is expected to be a landmark one, as it could determine which cryptoassets can be termed as securities. Coinbase itself has denied that the nine tokens the brothers traded — AMP, DerivaDEX, DFX Finance, LCX, Kromatika, Powerledger, Rally, Rare Governance Token and XYO — are securities.

The Wahis’ counsel further stated that neither the SEC nor Coinbase’s legal team considered the tokens at issue to be securities before the allegations were put forth. And so, the SEC should arrive at that decision before consequences are imposed, they added.

“The SEC’s parade of one-off enforcement actions against the likes of Kim Kardashian, DJ Khaled, Floyd Mayweather Jr., and now Ishan and Nikhil Wahi is—by contrast—a process designed to produce more heat than light,” they said.

Both brothers, along with their friend Sameer Ramani, were accused of trading at least 25 cryptoassets based on confidential information between June 2021 and April 2022, bagging them profits worth over $1.1 million.

Notably, Ishan Wahi and Nikhil Wahi had both initially pleaded “not guilty” to wire fraud, but Nikhil Wahi resorted to a plea bargain in September.

Don’t miss the next big story – join our free daily newsletter.

Follow Sam Bankman-Fried’s trial with the latest news from the courtroom


Upcoming Events

MON - WED, MARCH 18 - 20, 2024

Blockworks’ Digital Asset Summit (DAS) will take place March 18-20, 2024 at The Hilton London Metropole. Why London? Momentum.  London has become one of the world’s hottest crypto hubs.  Innovation is thriving, new institutional investors are flocking in, and regulators like […]

recent research

l1 cover.png


This analysis focuses on financial metrics for general-purpose L1 blockchains. In many ways, L1s should be viewed as an entirely new asset class more comparable to digital economies than traditional businesses. L1s are the core infrastructure enabling the creation of new-age businesses like onchain protocols.


Ripple previously announced its intent to acquire Fortress on Sept. 8


Four patent applications were published since Sept. 21, suggesting that PayPal is taking a close look at distributed ledger tech


If the market wasn’t quite so boring, perhaps BitBoy’s flameout would have been a little less fiery


Developers have a new testnet running, but devnet testing the Dencun upgrade is running behind schedule


A handful of Democrats are joining the anti-Gensler and pro-crypto movement


The Bank of International Settlements conducted the project in partnership with central banks from France, Singapore and Switzerland