SEC Games

Market Meditations | July 22, 2022

The SEC made an unprecedented move yesterday, bringing civil charges against a former Coinbase employee for insider trading. Not only is the SEC alleging insider trading, but they also named 9 coins that they claim are securities.

  • The Department of Justice arrested former product manager Ishan Wahi, charging him and two others with wire fraud. Later in the day, the SEC brought a civil case against them on charges of insider trading.
  • The SEC also named 9 cryptocurrencies as securities. The nine alleged securities are: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.
  • This is the second insider trading case of the year relative to crypto and the broad statute that allows the DOJ to charge someone with fraud when they have utilized “wires” like the internet or telephone system. Unlike the SEC, the DOJ did not reference insider trading or securities.
  • CFTC Commissioner Caroline Pham calls this “regulation by enforcement” and is concerned about the possible implications. Both her and Commissioner Kristin Johnson are calling for collaboration among regulators to address cases like this in the future.

The big question on everyone’s mind is whether the SEC will be able to prove these coins are, or were at the time of issuance, securities.