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

article-image

Blockworks exclusive artwork by Axel Rangel, modified by Blockworks

share

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.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates.png

Research

The convergence of DePIN and energy generation aims to address modern grid challenges by incentivizing distributed generation.

article-image

However, they noted there’s now an increased risk that unemployment and inflation will rise in the coming months. 

article-image

The network’s most ambitious upgrade since the Merge brings validator streamlining, smart account UX and doubled blobspace to Ethereum

article-image

Debate over extra Bitcoin use cases has returned, two years on from Ordinals

article-image

Altcoin season may be on a permanent pause as the market matures and paths grow more selective

article-image

Today’s blockchains are more like nervous systems without a brain — wiring without will

article-image

A number of blockchains make use of the Solana Virtual Machine