Blockchain Association, an organization that advocates for peer-to-peer technology that hands back power to creators and users, has filed an amicus brief in the ongoing SEC v. Wahi federal case.
The SEC v. Wahi Case
Posting on Twitter and updating the community on the amicus brief filing, Marisa Tashman Coppel, the policy counsel of the Blockchain Association, said they want to counter what they see as a trend by the United States Securities and Exchange Commission’s (SEC) to regulate crypto projects by enforcement.
1/ Today, the filed an amicus brief in SEC v. Wahi, an enforcement action indicating a new pattern by the agency – regulation by enforcement against third parties, who have no meaningful opportunity to defend themselves.
— Marisa Tashman Coppel (@MTCoppel)
Marisa added that the SEC has been penalizing firms and users, imposing enforcement actions against third parties with no meaningful opportunities to defend themselves.
On July 21, 2022, the SEC insider trading charges against Ishan Wahi, a former Coinbase product manager, his brother, and his friend for allegedly perpetrating a scheme ahead of major coin listing announcements.
The agency claims that Wahi and his associates profited from trading “at least nine unregistered securities” from June 2021 to April 2022. In their activities, they made $1.1 million in profits.
Their actions, the SEC continued, were against the terms of their duties. Coinbase repeatedly warned its employees not to make trades based on confidential information.
The United States Department of Justice (DoJ) also charged Wahi, his brother, and fried with wire fraud charges.
Regulation By Enforcement Needs To Stop
The SEC is a top regulator in the United States tasked with, among other duties, protecting investors, facilitating the building of capital formation, and ensuring that the markets are operated fairly and efficiently.
As part of their mandate of protecting retail investors and ensuring that everyone plays on a level field, the agency applies various guidelines that, under their assessment, the digital asset can be classified as an investment contract, compliant with the Howey Test.
Under the Howey Test, an asset is an investment contract, and under the United States securities law, if there is an “investment of money in a common enterprise with a reasonable expectation of profits from the efforts of others.”
While they have roles to play, the Blockchain Association is now filing an amicus brief in the SEC vs. Wahi case because it believes the SEC must prove that the nine tokens are indeed securities. Subsequently, this will force the court and the presiding judge to conduct nine “mini-trials” to make that determination.
1/ The SEC filed a complaint yesterday accusing ten companies of violating the securities laws: nine digital asset issuers & one exchange.
None of them are defendants in the case. None of them will get their day in court.
If this isn't regulation by enforcement, nothing is 🧵
— Jake Chervinsky (@jchervinsky)
Moreover, the Blockchain Association notes that the creators of the nine tokens are also not listed as defendants in this lawsuit. Therefore, they cannot defend themselves against the accusations leveled by the SEC.
Blockchain Association says that the SEC is improperly characterizing the Howey Test in this case. Furthermore, the team behind the nine projects will have to depend on Wahi defendants, who are strangers to their protocol.
It is this pattern of the SEC “alleging what it wants” without care that it can be held accountable that the Blockchain Association thinks should come to an end.
In December 2020, SEC sued Ripple Inc.’s executives, including Bradley Garlinghouse, for conducting an illegal ICO and raising over $1 billion from selling XRP, which they claim is an unregistered security.