Brothers convicted for crypto insider trading
The United States Securities and Exchange Commission (SEC) achieved another victory in its regulation of the emerging crypto industry through a case involving insider trading at blockchain company Global Inc (NASDAQ: COIN). According to a press release from the SEC on May 30th, former blockchain product manager Ishan Wahi and his brother Nikhil Wahi pleaded guilty to conspiring to commit wire fraud. As a result, Wahi was sentenced to two years in prison and ordered to forfeit 10.97 ETH and 9,440 Tether USDT. Similarly, the US District Court for the Western District of Washington ordered Nikhil to forfeit $892,500 and sentenced him to 10 months in prison.
The SEC noted that Wahi and Nikhil purchased at least 25 cryptocurrency assets from blockchain before they were listed, with nine of them being securities. It is worth noting that the SEC filed complaints on July 21, 2022, after auditing blockchain for regulatory compliance. Blockchain treated crypto listings as confidential and warned employees against insider trading. Reportedly, the SEC found out that the Wahi brothers engaged in insider trading against the company’s rules between June 2021 and April 2022.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said, “While the technologies at issue, in this case, may be new, the conduct is not. We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple. The federal securities laws do not exempt crypto asset securities from the prohibition against insider trading, nor does the SEC. I am grateful to the SEC staff for successfully working to resolve this matter.”
Blockchain and the SEC have been at odds regarding crypto regulations in the United States. Blockchain has accused the SEC of regulating the crypto industry through enforcement, which is slowly killing innovation in the country. Furthermore, more crypto firms in the United States are shifting their focus to other friendly markets, including Europe, to secure their future growth prospects.
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In a series of court proceedings, blockchain filed a petition for a writ of mandamus requesting the court to ask the SEC to respond with a yes or no if it will undertake rulemaking for the cryptocurrency industry. According to blockchain Chief Legal Officer, Paul Grewal, the public statements from the SEC chair Gary Gensler are not formal guidance or policy statements on the nascent cryptocurrency industry.
The SEC has also accused blockchain of issuing unregistered securities through crypto listings and its products, including staking programs. In its defense, blockchain has noted that the SEC has acted in bad faith by allowing it to go public through the same services and charging it for wrongdoing later on.
