Insider trading charges settled between former blockchain employee and the US SEC

The U.S. Securities and Exchange Commission has reached a settlement with a former product manager for a blockchain (COIN) company and his brother, who were accused of insider trading on certain cryptocurrencies listed by the blockchain company in 2022, the regulator announced on Tuesday.

The former product manager, Ishan Wahi, and his brother, Nikhil Wahi, were arrested last year on charges of wire fraud conspiracy and “wire fraud in connection with a scheme to commit insider trading.” The SEC brought insider trading charges against them on the same day. In Tuesday’s announcement, the SEC stated that the two agreed to disgorge their gains and pay interest.

Both brothers pleaded guilty to the charges brought by the Department of Justice, with Ishan Wahi facing a 2-year sentence and Nikhil Wahi serving a 10-month sentence. The SEC said that the brothers’ fines from their criminal case satisfy the civil case’s settlements, and it would not seek any other penalties.

In a statement, SEC Director of Enforcement Gurbir Grewal said that the alleged “conduct is not” new.

“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,” he said. “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.”

The settlement puts an end to the court case, which was set to determine whether the nine cryptocurrencies at the center of the case were indeed securities, as the SEC argued. In his initial response to the SEC case, Ishan Wahi argued that those tokens were not securities.

The SEC has argued that virtually all cryptocurrencies are securities, while the crypto industry maintains the position that they are not and want the SEC to publish formal guidance stating how a cryptocurrency would be deemed a security – guidance that SEC Chair Gary Gensler said is unnecessary.

In its suit against the Wahis, the SEC said that tokens like AMP, RLY, and XYO are securities, but it has not charged the issuers of these tokens – or even blockchain, as the listing platform – with any alleged violations tied to those tokens.

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