For some nuance, though, partly this has to do with lack of SEC enforcement on crypto as a security. My opinion then would have been that this should be insider trading, crypto should be classified as a security, and also that I wasn’t sure the SEC would classify this as insider trading.

Since the definition of insider trading is kind of, “whatever the SEC enforces”, it’s possible to believe that this is a security that was insider traded and also that it’s not “insider trading” in the only meaningful way (the SEC way.)

> the definition of insider trading is kind of, “whatever the SEC enforces”

Insider trading is a crime. The SEC cannot bring criminal complaints. Every insider trader who has gone to jail was prosecuted by the DoJ.

According to SEC: https://www.investor.gov/introduction-investing/investing-ba...

FBI: https://www.fbi.gov/news/stories/insider-trading

Only talk about securities. It seems to me as if it would depend a lot on if the digital asset(s) in question count as securities or not.

Nope, insider trading is a type of fraud, they’ll be charged with wire fraud and the question on securities will never arise

The already have been as the DOJ press release states. Also the SEC is filing a civil case, as they do

Yeah I was about to say something similar. Our existing insider trading laws don't quite fit this situation, which is why they're being charged with "wire fraud conspiracy" instead of something more specific.

The DoJ isn't prosecuting them for `Insider Trading`. It's prosecuting them for Wire Fraud against Coinbase. Wire Fraud doesn't require there be a security involved at all.

Thank you, can you elaborate a bit? Insider trading involves trading of a company's securities, correct? Because crypto isn't a security in the SEC's eyes, this doesn't apply?

How are they getting them on wire fraud charges? The texts back and forth describing the scheme?

The way I understand it, there is a lot of controversy over whether or not crypto is a security. However, Insider Trading is a type of Fraud, and proving fraud does not require it to be insider trading and does not require crypto to be a security. What makes it Wire Fraud is just that it took place "over the wire", ie on the internet.

I think the key to understanding how this is fraud is the fact that they acted on privileged Material Information to the disadvantage of their employer, not the exact nature of how they profited off it. Essentially, they stole company secrets.

I thought Hoeg's video on it was good:

https://www.youtube.com/watch?v=EafL0w48IAg

If you read the actual SEC filing, you'll note that they're only filing for 7 of the alleged 25 coins that he traded. [1] Even the SEC agrees that this was not insider trading in all 25 instances.

"Throughout the relevant period, Nikhil and Ramani repeatedly traded ahead of Coinbase listing announcements, trading in at least 25 tokens. At least seven of the listing announcements described above involved crypto asset securities"

1 - https://www.sec.gov/litigation/complaints/2022/comp-pr2022-1...

No. Suspects are often arrested on a subset of the criminal charges with which they will ultimately be indicted. Even in more serious crimes like mass shootings, prosecutors will press charges on only a few of the homicide counts at first. This is common practice for prosecutors.

Well, when they indict on the remaining 18 then we can update our models. Until then, the SEC is only alleging that 7 were securities.

That's a horrible prior.

This isn't about the SEC at all. Arresting on a subset of eventual charges is something that nearly all prosecutors do, and for a large set of very good strategic reasons.

I think you'd be hard-pressed to find many examples of high-profile cases where the original arrest was based on all possible charges.

Yeah, I'm not arguing they don't do that. This is one of those cases where arguing the negative without clearly stating your argument makes things easy but not particularly useful.

What argument are you presenting instead? Because he was charged for 7 instances of security fraud we should assume that all 25 are securities fraud? Regardless of whether the SEC eventually charges all 25, they've clearly decided to differentiate them all on some metric (otherwise, they would've charged them all at the same time).

True, but your model should already reflect the fact that this is a not an uncommon pattern.

Is there a list of all 25 somewhere? This could provide some illumination on what SEC does and does not consider a security.

Or maybe the SEC considers all of them securities but thought that they had the strongest case for these seven and didn't want the distraction of arguing about the other 18. But yeah, would be interesting to see the list.

If SEC considers any of them securities, it's very strange for them to go after a single guy at Coinbase and not the entire company, since they've just declared them an illegal securities exchange.

(As opposed to an illegal commodities exchange for bitcoin.)

Yeah and Coinbase just fired back: https://blog.coinbase.com/coinbase-does-not-list-securities-...

This will be the central issue of the case. It'll be interesting! Will Coinbase step in to defend this guy who they were going to fire, just to prove that they don't list securities?

I think maybe it's only strange if you assume the SEC has unlimited money and time. Grandparent comment says it better, but they're likely focusing on cases they think are pretty clear-cut.

I'm interested in cases like Rari where there was a decentralized governance mechanism but it was dominated by a "core team", that feels like it encompasses a larger slice of the space than I would have expected. Many of the others are deeply unsurprising though, they are US corporations, took VC investments, have active managerial teams which are all employees of that corp, and advertise themselves as working to increase token value.

Yeah, good luck convincing a judge about that

"Well technically" works sometimes. Only sometimes. And people who aren't familiar with SEC rules are not really qualified to say if it's fair game or not.

That's a fantastic insight - thanks for the link.