A United States court ruled that trading in certain crypto assets on secondary markets, such as cryptocurrency exchanges, are securities transactions, a position opposite to that taken by Coinbase and the cryptocurrency industry in general.
The failure comes in a insider trading case against former Coinbase product manager Ishan Wahibrother Nikhil Wahi and friend Sameer Ramani.
โEach issuer continued to make that representation regarding the profitability of its tokens even when the tokens were traded on secondary markets,โ the ruling says. indicating: "Therefore, under Howey, all crypto assets that Ramani purchased and traded were investment contracts."
The court declaration is a default judgment, which is issued when a defendant fails to appear in court or respond to a subpoena. The document notes that "Ramani appears to have fled the country to avoid criminal prosecution for the actions alleged in this case."
Ramani has been prohibited from committing future violations and must pay a civil penalty of twice the amount of his estimated profits. The SEC also attempted to impose prejudgment interest, but the court denied this request.
The U.S. Securities and Exchange Commission reached a settlement with both Wahis last May. The particular agency referred to the case as the โfirst cryptocurrency insider trading tipping scheme.โ
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