While the legal discussion over whether cryptocurrency sales qualify as securities continues, Coinbase has asked the United States Department of Justice to rule out a previous default judgment regarding crypto securities transactions.
Coinbase Requests Court To Overturn Crypto Sales Judgement
On Tuesday, Coinbase wrote a letter concerning the case between the US Securities and Exchange Commission (SEC) and Wahi to US District Judge Katherine Failla. In the letter, William Savitt has asked Judge Failla to reject the SEC’s earlier designation of cryptocurrency sales on a secondary market as “securities contracts.”
The letter was meant to provide additional details that should have been included in the SEC’s Notice of Supplemental Authority in relation to the default judgment entered by the US District Court for the Western District of Washington on the Commission’s unopposed motion in the case.
Ishan Wahi, his brother Nikhil, and his brother’s friend Sameer Ramani were accused by the SEC of fraudulent activities, based on the defendants’ theft of confidential Coinbase data and their shady acquisition of nine digital assets.
The letter read:
The complaint alleged securities fraud based on the defendants’ theft of Coinbase’s confidential information and front-running of purchases of nine digital assets, none of which are at issue in the SEC’s complaint in this matter.
According to the letter, the agency did not mention any issuers, exchanges, or other participants in the crypto business as parties in the lawsuit.
Consequently, the defendants filed a motion to dismiss the lawsuit on February 6, 2023, citing that the regulator had overreached its statutory power. This is because the stated tokens were not “investment contracts.” Thus, the defendant’s action was supported by documents submitted by Coinbase and some other industry participants.
However, the move was never concluded due to a termination of the Commission’s action against the defendants in an ‘admit-no-deny, zero-dollar settlement.’
Default Judgment Against Sameer Ramani
On March 1, the Wahi Court delivered a default judgment against Sameer Ramani, based on biased evidence, uncovering among other things that “resolution on the merits was not reasonably possible.”
It is noteworthy that former Coinbase product manager Ishan and his brother Nikhil Wahi settled with the US regulator in 2023, to prevent the possibility that a judge will rule in favor of the SEC on the tokens’ security nature. Meanwhile, Sameer Ramani did not respond to complaints or service and was believed to have left the country.
As a result of his negligence to the allegation, the Clerk of Court entered default against him on October 26, last year. Nearly three months later, on January 18, 2024, the SEC moved to file a motion to have Ramani’s default judgment entered.
Due to the absence of a briefing from a party or Coinbase, the regulatory watchdog’s motion was unopposed. Meanwhile, a move for judgment on the pleadings had been fully prepared and argued before the court; yet, the SEC’s motion did not state this action.
When the claims in the complaint were considered true, it was discovered that the cryptocurrency assets were investment contracts — a claim that the agency had earlier denied to the Wahi court.
Featured image from Shutterstock, chart from Tradingview.com
