SEC identifies nine cryptos as securities in its complaint against former Coinbase exec

Last week, the U.S. Securities and Exchange Commission filed a complaint against a former executive of a crypto exchange and other parties for insider trading. What got the attention of some market watchers, however, was that the SEC labelled nine digital tokens as securities in its complaint, a move that might hold greater implications for the digital assets industry.

On Thursday, the SEC and the U.S. Department of Justice filed insider trading charges against former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi and Sameer Ramani. In a press release, the DOJ stated that the “former Coinbase employee allegedly tipped his brother and friend regarding crypto assets that were going to be listed on Coinbase exchanges.”

The SEC also used its first insider trading case to formally declare nine digital tokens as “securities.” While this is not the first time that the commission identified cryptocurrencies as securities, it did so in the past in settlements with their issuers or in enforcement actions, according to Coindesk.

Its complaint last week marked the first time that SEC named cryptos as securities without charging their issuers or the exchange listing the assets. The nine tokens mentioned were AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX and KROM.

“We are not concerned with labels, but rather the economic realities of an offering,” SEC’s Division of Enforcement Gurbir S. Grewal said. “In this case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase. Rest assured, we’ll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved.”

According to Carolyn M. Welshhans, Acting Chief of the Enforcement Division’s Crypto Assets and Cyber Unit, the defendants earned over $1.1 million in profits in nearly one year, which were illegally obtained by engaging in insider trading. “As today’s case demonstrates, whether in equities, options, crypto assets, or other securities, we will vindicate our mission by identifying and combatting insider trading in securities wherever we see it,” she added.

Meanwhile, Coinbase filed a petition with the SEC calling on the regulator “to develop a workable regulatory framework for digital asset securities guided by formal procedures and a public notice-and-comment process, rather than through arbitrary enforcement or guidance developed behind closed doors.”

“Securities law is thus not well-suited to govern digital assets,” the company added. “Attempted application of such ill-fitting laws to crypto creates a number of problems, including lack of regulation for the subset of crypto assets that are securities.”

TokenPost | [email protected]