This ruling was made in absentia following the SEC’s settlement agreement with a former Coinbase manager in an insider trading case

Coinbase calls the court’s decision to recognize cryptocurrencies in secondary sales as securities unweighted

06.03.2024 - 13:40

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3 min

What’s new? Coinbase attorney Michael Savitt has filed a new request with Judge Katherine Failla, who is leading the crypto exchange’s proceedings with the US Securities and Exchange Commission (SEC). He asked that the court’s ruling in absentia in another case by the regulator, in which secondary sales of crypto assets were deemed to be securities transactions, be disregarded. According to the lawyer, such a ruling was made without due consideration of the court’s arguments.

The lawyer’s appeal

What else is known? On June 6 last year, the SEC accused Coinbase of operating without registering as an exchange, broker or clearing agency, as well as unregistered offer and sale of securities under the staking program, to which it attributed 13 tokens, including SOL, ADA, and MATIC.

The exchange is seeking a full dismissal of the case; during the proceedings, it also accused the regulator of due process violations. Letters to the court in defense of the exchange were filed by many industry organizations and venture capital firms, as well as Wyoming Republican Senator Cynthia Lummis.

SEC pressure was one of the reasons why Coinbase focused more on global business development. Thus, the exchange received a license in France, engaged former UK Finance Minister George Osborne as an advisor, and announced the purchase of a company in the EU to launch crypto derivatives trading services.

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The decision, which attorney Savitt mentions in a new filing, was made as part of the SEC’s lawsuit against former Coinbase top executive Ishan Wahi, as well as his associates Nikhil Wahi and Sameer Ramani, for insider trading in several cryptocurrencies.

The defendants filed a motion to dismiss the case, arguing that the cryptocurrencies in question are not investment contracts and are outside the SEC’s jurisdiction. This motion was supported by Coinbase itself, among others.

However, even before the motion could be decided, a settlement agreement was reached in June 2023, in which the defendants did not admit but did not deny guilt, and the SEC received an in absentia judgment in the case, where the court agreed with the regulator’s arguments. Meanwhile, despite the agreement with the SEC, Ishan Wahi received two years in prison for the same actions on fraud charges in another proceeding.

Savitt argues that the decision carries no weight because the key issues were never actually discussed or litigated, and the defendants themselves were not present at the hearing.

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