Former Coinbase employee agrees to cooperate in future SEC investigations

Former Coinbase employee Ishan Wahi reached a settlement with the U.S. Securities and Exchange Commission over insider trading charges related to the front-running of token listings by Wahi and others.

As part of the settlement, filed in a federal court in Seattle on Tuesday, Wahi agreed to be interviewed in connection with other SEC investigations and actions. Coinbase disclosed in late March that the SEC gave notice of an investigation into the company’s digital asset listings, staking-as-a-service, institutional trading and wallet services.

Wahi’s cooperation agreement with the SEC applies to his own case “and any related judicial or administrative proceeding or investigation commenced by the Commission or to which the Commission is a party,” meaning he could cooperate in the separate investigation.

Coinbase has not been accused of any wrongdoing in Wahi’s insider trading case, but the SEC alleged in its initial complaint against Wahi last year that the tokens at the center of the insider trading allegations were unregistered securities, meaning the SEC could try to hold Coinbase liable for facilitating the sale of unregistered security investments for the tokens that the company ultimately listed. 

Wahi already pleaded guilty to criminal charges and was sentenced to two years in prison. As part of his civil agreement with the SEC, he also gave the money he made from insider trades.

“The federal securities laws do not exempt crypto asset securities from the prohibition against insider trading, nor does the SEC," said SEC Enforcement Director Gurbir Grewal in a statement announcing the settlement.

Last month, Coinbase preempted possible SEC action by suing the agency to give it a response to a petition for crypto-specific rules. The SEC is fighting that lawsuit.

Both current SEC Chair Gary Gensler and former SEC Chair Jay Clayton have warned for years that the vast majority of digital assets are securities under U.S. financial laws and therefore subject to existing registration and financial disclosure requirements for security investments, like stocks and bonds.