As market and regulatory uncertainty swirl around
cryptocurrencies and other digital assets, the Securities and
Exchange Commission (the “SEC”) and the Department of
Justice (the “DOJ”) have taken divergent approaches to
charging digital asset insider trading. For its part, the SEC, in a
recent enforcement case, asserts jurisdiction over certain
cryptocurrencies as “securities” and brought traditional
insider trading charges under Section 10(b) of the Securities
Exchange Act and Rule 10b-5 promulgated thereunder.1 The
DOJ, however, has avoided “securities” designations
altogether by using wire fraud and other non-securities criminal
charges to pursue insider trading related to a variety of digital
assets including non-fungible tokens (“NFTs”) and
cryptocurrencies.2 Prior to June 1, 2022, the DOJ’s
use of wire fraud to combat insider trading of digital assets may
have seemed “novel.” However, the DOJ has recently
adopted the approach that regardless of the underlying instrument
(NFTs, debt, cryptocurrencies, insurance products or any other
non-security product), it is willing to bring fraud charges where
it believes it can prove trading based on fraudulently obtained
confidential information. 3
The divergent SEC and DOJ approaches played out on July 21,
2022, when the SEC and DOJ filed parallel insider trading cases
against a former Coinbase Global, Inc. (“Coinbase”)
employee (Ishan Wahi), his brother (Nikhil Wahi) and a friend
(Sameer Ramani).4 Both cases are based on the
defendants’ trades in digital assets that were slated for
listing on Coinbase before the listing announcements were made
public. The DOJ Indictment—the first cryptocurrency insider
trading case brought by the DOJ —bypassed the “are
they” or “aren’t they” securities question by
charging the trio of defendants with conspiracy and wire fraud for
allegedly insider trading in six digital assets before they were
listed on Coinbase (including two that the SEC…