Coinbase Global is facing a US Securities and Exchange Commission (SEC) probe into whether it improperly let Americans trade digital assets that should have been registered as securities.
The Department of Justice announced charges on 21 July against Ishan Wahi, a former product manager at Coinbase for leaking information to help his brother (Nikhil Wahi) and a friend (Sameer Ramani) front-run expected price jumps before the tokens were listed on the platform with confidential non-public Coinbase information, and therefore violating its insider trading rules.
The investments ranged from $60,000 to over $610,000 and led to gainst totaling at least $1.5 million
The Securities and Exchanges Commission also alleged that Nikhil Wahi and Sameer Ramani purchased at least 25 digital tokens – at least nine of which were securities. seven out of nine of the digital tokens were listed on Coinbase’s platform. The SEC has not indicated whether it will take any action against Coinbase for listing these tokens.
Paul Grewal, Chief Legal Officer of Coinbase released a statement on Coinbase’s blog declaring that “Coinbase does not list securities. End of story,” defending the platform’s diligence process and reiterating its collaborative attitude with the SEC.
The SEC has been scrutinised by the crypto space for regulating it through enforcement actions in the absence of a concrete digital asset securities regulatory framework since 2018.
The friction surrounding the fundamental disagreement of whether digital assets like cryptocurrencies and NFTs constitute securities is producing more heat this year. SEC is currently entangled in a $1.3 billion lawsuit against XRP creator Ripple.
Legally, if a court rules that a digital asset is a security, the Web3 is out of the question because neither an NFT platform nor a cryptocurrency exchange now have securities exchange licenses.