Blockchain Association Files Amicus Brief in Coinbase Insider Trading Case
The US Securities and Exchange Commission (SEC) is trying to create a “chilling effect” on the blockchain industry by labeling nine tokens at the center of an insider trading case as securities, but not giving the token creators a chance to defend themselves.
Last year, the SEC filed a complaint against former Coinbase CEO Ishan Wahi for tipping off his brother and close friend regarding new listings of tokens on Coinbase. Earlier this month, Wahi pleaded guilty to insider trading charges, changing his plea from not guilty. Wahi still disputes the securities fraud charges.
The tokens in question include AMP, XYO, LCX, POWR, RLY, RGT, DDX, DFX and KROM. Data from CoinGecko indicates that these tokens trade in relatively thin volume, and do not rank among the top 150 tokens of the service traces.
The Blockchain Association, a Washington-based crypto lobby, seeks to advance this argument by saying that the SEC is engaging in “absentee enforcement” since the token creators are not connected to the case, nor can they by law intervene or be heard otherwise.
“Such conduct is unbecoming of a public body, and inconsistent with due process concerns,” the document said. “The SEC’s motive is therefore only to go backwards for a precedent that can be used in other cases, as it is actually already doing in other cases where the DOJ has filed suit, and the SEC has piled up similar allegations of violations of securities laws against absent third parties. “
In late December, the SEC called FTX’s former exchange token FTT a security in a complaint against FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison. Neither Ellison nor Wang contested the complaint as part of a plea agreement.
“Instead of pursuing proper regulations under [Administrative Procedure Act] To address these problems, the SEC has instead issued a long history of inconsistent, incomplete and confusing public statements, and has followed a pattern of “regulation by enforcement,” the filing said. “Now the SEC is expanding its ‘regulation by enforcement’ doctrine to ‘regulation by uncontested claim.’
The Administrative Procedure Act (APA) is a statute that outlines the procedures for administrative law, and how federal administrative agencies make rules and make judgments.
The document outlines in considerable detail, citing prior cases, how digital asset laws and past enforcement by the SEC make the US an opaque and confusing jurisdiction in which to do business for the digital asset industry. All along, there have been significant changes in the token’s value due to the SEC’s actions.
“The SEC’s statement that a particular token is a security has also already resulted in delisting from cryptocurrency trading platforms,” the document said, pointing to a delisting of one of the tokens by Binance.US out of an “abundance of caution.”
Wahi is due back in court on April 6. Wahi’s lawyers have filed a motion to dismiss the SEC’s securities fraud complaint, arguing that the symbols in question are not securities, while still pleading guilty to insider trading and other charges.
