Crypto lobbying group Blockchain Association has filed an amicus brief in the U.S. Securities and Exchange Commission’s (SEC) lawsuit against a former Coinbase executive and two other individuals.
Last year, the SEC sued former Coinbase employee Ishan Wahi, his younger brother Nikhil Wahi and a certain Sameer Ramani for allegedly engaging in insider trading involving “crypto asset securities.”
The Blockchain Association says in the amicus brief that the SEC has branded some crypto assets as securities without any court having settled the matter.
“In this action, the Securities and Exchange Commission (‘SEC) alleges that several cryptographic tokens are ‘securities,’ without any court having previously made such a determination, and in a manner that does not allow the users or creators of these tokens to argue against that position. Such an action may have a severely negative effect on those tokens, which is a denial of their creators’ due process rights.”
According to Blockchain Association CEO Kristin Smith, the SEC’s actions are having a negative impact on stakeholders.
“With this action, however, the SEC’s actions target third parties who have no meaningful opportunity to defend themselves. The SEC has done more to confuse rather than clarify the application of US securities laws, spreading fear and cultivating distrust among the very market participants the agency is tasked to protect.
Earlier this month, lawyers for the defendants filed a motion asking the court to dismiss the SEC’s amended complaint lodged against the Wahi brothers and Ramani. The lawyers argued in the filing that the SEC is using “brute force” to seize broad regulatory jurisdiction over the crypto industry.
“The linchpin of the Amended Complaint is that the digital assets Ishan Wahi, his brother, and the other defendant traded are ‘securities’ under the Exchange Act.
Specifically, the SEC claims that each of those digital assets constitutes an ‘investment contract’ (and thus a security). The SEC is wrong.
The term ‘investment contract’ requires – as the statute says – a contract. But here there are no contracts, written or implied.
The developers who created the tokens at issue have no obligations whatsoever to purchasers who later bought those tokens on the secondary market.
And with zero contractual relationship, there cannot be an ‘investment contract.’ It is that simple.”
Earlier this month, Ishan Wahi pled guilty to two counts of conspiracy to commit wire fraud in connection with a scheme to commit insider trading in a separate lawsuit filed by the U.S. Department of Justice (DOJ).
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