On May 30, the United States Securities and Exchange Commission (SEC) announced that Ishan Wahi, the former Coinbase product manager, and his brother, Nikhil Wahi, had agreed to settle charges brought forth by the regulator accusing them of engaging in an insider trading scheme.
SEC Settlement With Former Coinbase Product Manager
In this way, the two defendants also agreed that their actions violated Section 10(b) of the Securities Exchange Act.
Accordingly, Ishan has been sentenced to two years in prison, while his brother, Nikhil, will serve ten months behind bars.
In a statement, the SEC also said the former Coinbase product manager forfeited 10.97 ETH and 9,440 USDT. On the other hand, Nikhil has submitted to the state 892,500 USDT.
This is part of the settlement and forfeiture of securities the SEC said were ill-gotten.
The case was settled roughly a year after the SEC filed the suit at the District Court for the Western District of Washington, accusing the former Coinbase product manager of using confidential information to benefit from trading crypto assets, most of which, the regulator claims, were securities.
According to the Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, their actions amounted to insider trading. Grewal stated:
While the technologies at issue, in this case, may be new, the conduct is not. 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.
How Will The SEC Handle Ethereum?
While the SEC succeeded, questions are being asked about how the regulator will allow the forfeiture of those digital assets, including Ethereum, in a way that the regulator considers legal and lawful.
Though there is an argument that all assets received from the two brothers will be forfeited to the Department of Justice (DoJ), some maintain that the SEC must first confirm receipt.
Recently, Gary Gensler, the chairman of the SEC, failed to clarify whether Ethereum, like Bitcoin, is a commodity that should be treated as a property and its capital gains tax.
While in front of the House Financial Services Committee, Gensler repeatedly said the agency was learning more about Ethereum.
This didn’t help ETH since a clear endorsement from the SEC, the principal regulator, could lead to regulatory clarity, possibly driving prices and on-chain activity.
SEC’s position differs from the Commodity Futures Trading Commission (CFTC), which classifies Bitcoin, Ethereum, and Litecoin as commodities, not securities.
Still, a statement from the SEC declaring ETH a commodity is much awaited by the community and could help prices. In late 2020, the SEC sued payment company Ripple and its executives, claiming XRP is an unregistered security. A ruling on this case is expected in the coming few months.