The lawyers for a former Coinbase product manager, Ishan Wahi, and his brother, Nikhil Wahi, have submitted a motion to dismiss allegations of insider trading. The legal team, on February 6, filed the motion to the United States District Court for the Western District of Washington.
The U.S. Securities and Exchange Commission (SEC) filed an insider trading complaint against the Wahi brothers and their colleague Sameer Ramani in July 2022, claiming they profited $1.1 million by using Ishan’s predictions on the date and names of coins that would be listed on Coinbase.
However, the lawyers argued that the nine tokens in question did not meet the legal definition of securities since they were sold on the secondary market and lacked an investment contract, “written or implied.” The tokens include AMP (AMP), Rally (RLY), DerivaDEX (DDX), XYO (XYO), Rari Governance Token (RGT), LCX (LCX), Powerledger (POWR), DFX Finance (DFX), and Kromatika (KROM).
They also asserted that token developers in secondary markets have no responsibilities to buyers and that the absence of any contractual requirements precludes the existence of an investment contract.
According to the lawyers, the tokens are all utility tokens whose primary purpose is to be used on a platform rather than as an investment instrument.
The Wahi’s attorneys criticized the SEC for allegedly attempting to use enforcement action to gain broad regulatory power over a sizable new business. They argued that the regulator has no explicit congressional authorization to classify the tokens in question as securities.
The attorneys further criticized the SEC for allegedly trying to gain broad regulatory power over the digital asset industry without explicit congressional authorization.
The attorneys stated:
“If the SEC really believes digital assets are securities, it should engage in a rulemaking or other public proceeding explicating that view and providing guidance to regulated parties on its implications.”
Unless a settlement is reached, the lawsuit will proceed if the judge denies the motion to dismiss.
The motion to dismiss was submitted by a collaboration of five law firms: Greenberg Traurig LLP, Harris St. Laurent & Wechsler LLP, Jones Day, Chaudhry Law PLLC, and Allen Hansen Maybrown & Offenbecher.
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