[7-21-2022]Insider trading charges filed against CB employee

[PrimeNumber7]

https://www.wsj.com/articles/former-coinbase-employee-charged-in-alleged-insider-trading-scheme-11658420556

The DOJ recently filed charges against Ishan Wahi, a former Coinbase employee, his friend, and his brother, alleging insider trading.

It is alleged that Wahi tipped his friend and brother off about upcoming coin listings on the Coinbase platform, which allowed them to trade in advance of this news. As part of their case, it is alleged that certain tokens listed on Coinbase are unregistered securities.

I understand that the DOJ is largely relying on certain tokens listed on Coinbase as being a "security", and I think they are stretching the definition. What Wahi is alledged to have done is certainly unethical, but I don't think it reaches the point of being illegal.

[bbc.reporter]

I am not quite certain why it is only now mainstream media is considering this as news. Anyone who has been in the cryptospace for more than 5 years knows that all of the exchanges are guilty of this. This was one of the stratgies used during 2016 and 2017 that made Binance into the largest exchange we have today.

In any case, you are correct. It is arguable that some of the tokens that can be considered securites might not be securities. This is because the SEC uses an old process called the Howey test. In a time of Defi liquidity providing and yield farming, I reckon that the SEC should update their process.

[NeuroticFish]

I am not quite certain why it is only now mainstream media is considering this as news. Anyone who has been in the cryptospace for more than 5 years knows that all of the exchanges are guilty of this.

"Every uncaught thieve is a honest merchant". While we suspect the exchanges are guilty of this (and many more), not much was actually proven and afaik nobody was officially accused (charges filled) for this. And this is a news (much better than many news in crypto space tbh). This can be a good step towards normality and fairness (although we are very far from that and even the fact that only one person was found guilty is overly strange).

[Lucius]

https://bitcointalk.org/index.php?topic=5407225.0

There has been a discussion on this topic for some time in the Legal board, and all I can say is that I absolutely support the strictest sanctions against anyone who abuses their position in any way. First of all, people should be demotivated to do such things - because people agree to risk a few years in prison if they get caught, and in the process manage to hide the millions of $ that await them when they are free again.

I understand that the DOJ is largely relying on certain tokens listed on Coinbase as being a "security", and I think they are stretching the definition. What Wahi is alledged to have done is certainly unethical, but I don't think it reaches the point of being illegal.

For me it is both unethical and illegal, but it all depends on how one views the world. Today, we are increasingly going in the direction of saying that many negative things are unethical, even though someone used their position and privileged information to obtain financial profit. Recently, in my country, the governor of the central bank and some of his associates were suspected of using privileged information available only to them, which earned them a certain amount of money - instead of investigation and conviction, the matter was only called unethical - so although the example may not be completely comparable, society has become too lenient towards some things.

[PrimeNumber7]

I understand that the DOJ is largely relying on certain tokens listed on Coinbase as being a "security", and I think they are stretching the definition. What Wahi is alledged to have done is certainly unethical, but I don't think it reaches the point of being illegal.

For me it is both unethical and illegal, but it all depends on how one views the world. Today, we are increasingly going in the direction of saying that many negative things are unethical, even though someone used their position and privileged information to obtain financial profit. Recently, in my country, the governor of the central bank and some of his associates were suspected of using privileged information available only to them, which earned them a certain amount of money - instead of investigation and conviction, the matter was only called unethical - so although the example may not be completely comparable, society has become too lenient towards some things.

For something to be illegal, there needs to be an explicit law prohibiting said action. In other words, someone needs to be able to know ahead of time that a particular action is prohibited, so they can act accordingly. For something to be unethical, they will need to consult with community standards, which may change from time to time, and may change retroactively. There are no due process protections when someone does something unethical.

[NeuroticFish]

For something to be illegal, there needs to be an explicit law prohibiting said action. In other words, someone needs to be able to know ahead of time that a particular action is prohibited, so they can act accordingly. For something to be unethical, they will need to consult with community standards, which may change from time to time, and may change retroactively. There are no due process protections when someone does something unethical.

While there are most probably laws for (actually against) that in case of stocks or securities, I am not sure they apply for crypto "products", since legislation (as explicit words) is wonderfully missing them.
However, the spirit of the law may include them and a judge may go by that. Even more, I expect that a company like Coinbase has an internal code of conduct for the employees explicitly prohibiting that (if they don't have that, they're incredibly sloppy); but I don't know how much do company rules mater in a lawsuit.

It's... difficult to say what's going to happen there...

[goldkingcoiner]

They all insider-trade. I completely agree with what some people in this thread are saying. Coinbase just happened to get caught. Of course, they still deserve punishment for it. Once again showing how CEX will always be inferior to DEX which will always be inferior to P2P trading.

This kind of shady insider trading is something you can find a lot of especially in exchanges which offer derivative trading. Its all a bunch of horseshit. People do not really understand the scam which is high leverage liquidation. If you want to short your coin just swap it for USDT. Now you're shorting at 1x without any liquidation point. Better, right?

Hope Coinbase gets what it deserves.

[PrimeNumber7]

For something to be illegal, there needs to be an explicit law prohibiting said action. In other words, someone needs to be able to know ahead of time that a particular action is prohibited, so they can act accordingly. For something to be unethical, they will need to consult with community standards, which may change from time to time, and may change retroactively. There are no due process protections when someone does something unethical.

While there are most probably laws for (actually against) that in case of stocks or securities, I am not sure they apply for crypto "products", since legislation (as explicit words) is wonderfully missing them.
However, the spirit of the law may include them and a judge may go by that. Even more, I expect that a company like Coinbase has an internal code of conduct for the employees explicitly prohibiting that (if they don't have that, they're incredibly sloppy); but I don't know how much do company rules mater in a lawsuit.

It's... difficult to say what's going to happen there...

Indeed, the criminal case alleges that Wahi deprived Coinbase of its exclusive use of "confidential" business information.

The SEC civil case alleges the tokens in question are "securities". They argue that the value of the tokens is dependent on the work of others, the tokens are securities. I reviewed their argument for a few of the tokens, and I think this argument is baseless.

[bbc.reporter]

They all insider-trade. I completely agree with what some people in this thread are saying. Coinbase just happened to get caught. Of course, they still deserve punishment for it. Once again showing how CEX will always be inferior to DEX which will always be inferior to P2P trading.

This kind of shady insider trading is something you can find a lot of especially in exchanges which offer derivative trading. Its all a bunch of horseshit. People do not really understand the scam which is high leverage liquidation. If you want to short your coin just swap it for USDT. Now you're shorting at 1x without any liquidation point. Better, right?

Hope Coinbase gets what it deserves.

If you do not want to use leverage, then do not use it. There is nothing wrong with this type of thinking. However, if you want others to follow you in your type of thinking about leverage, this is where it becomes wrong of you.

Also, CEX being inferior to DEX is not that simple. The both of them have advantages and disadvantages. However, I agree to your idea that using DEX and Defi should be encouraged.

[cr1776]

They all insider-trade. I completely agree with what some people in this thread are saying. Coinbase just happened to get caught. Of course, they still deserve punishment for it. Once again showing how CEX will always be inferior to DEX which will always be inferior to P2P trading.

This kind of shady insider trading is something you can find a lot of especially in exchanges which offer derivative trading. Its all a bunch of horseshit. People do not really understand the scam which is high leverage liquidation. If you want to short your coin just swap it for USDT. Now you're shorting at 1x without any liquidation point. Better, right?

Hope Coinbase gets what it deserves.

Is it actually Coinbase that will be getting something it deserves?  I believe that it is three employees who were abusing their positions, not coinbase itself.  Anyway, it certainly is an abuse of trust of the customers who those employees are supposed to be serving and abuse of the trust that their employer placed in them.  Whether it is criminal is a different issue due to the nature of some of the coins, it is certainly wrong no matter what though.

I agree with you about centralized exchanges and trading, it is a recipe for just these kinds of shenanigans.