Paul Grewal, Chief Legal Officer at Coinbase, in a post expressed his dismissive views on a recent judgment that stated that secondary sales of cryptocurrencies are considered securities. The crucial judgment came in an insider trading case linked to the US’s biggest crypto exchange.
Coinbase legal head on insider trading case
As per reports, Coinbase’s former product manager Ishan Wahi, his brother Nikhil Wahi, and their friend Sameer Ramani got caught in an insider trading act. On March 1, a US court ruled that trading certain crypto assets on a secondary market, such as Coinbase, constitutes securities transactions.
Coinbase’s CLO stated that the default judgment isn’t contested. He highlighted that these judgments are where the defendant doesn’t contest the case, are not contested. The whole point here is that the defendant didn’t show up from his hideout in India. He added that, so the judge is required to take everything the Securities and Exchange Commission (SEC) says in the complaint as true.
Grewal mentioned that in this case, the judge confirmed that she only considered the SEC’s filings. She didn’t review any amicus briefs or other papers that might challenge the commission’s arguments.
He strikes out a point that default judgments are generally not given much weight as precedent or persuasion in other cases. The commission was pushing against a completely open door. He criticized the SEC’s strategy of suing absent defendants and intermediaries, avoiding issuers in those cases, as insidious.
Will it affect crypto industry?
As per Coinbase CLO, those with the greatest incentive and access to information that could challenge the SEC’s arguments never have the chance to defend themselves.
It’s also why the SEC’s strategy of suing absent defendants and intermediaries while avoiding issuers in those same cases, is so insidious. The people with the greatest incentive and access to information that blows their arguments out of the water never have the chance.
Reports show that in this specific case, the judge took a stance that is considered a default judgment against Sameer Ramani. The alleged convict had reportedly fled the country to avoid criminal prosecution. However, the court concluded the analysis that tokens traded on the secondary market were considered investment contracts under the Howey test.
The ruling mentioned that each issuer continued to portray the profitability of their tokens even as the tokens were traded on secondary markets. The crucial case is termed as the first ever insider trading case involving crypto markets.
