US court recognizes altcoins as securities
US court recognizes altcoins as securities
A court in the United States has made an important decision that has the potential to affect the future of cryptocurrency trading. The judge ruled that altcoins traded on exchanges are securities.
The decision relates to insider trading charges against former Coinbase manager Ishan Wahi, as well as Nikhil Wahi and Samir Ramani, reports The Block.
The case, brought by the Securities and Exchange Commission (SEC), was based on confidential information about illegal token trading by the three managers.
"Under the Howey test, all of the cryptoassets sold by Ramani are investment contracts," the court ruling stated. The issuers reportedly claimed that their tokens were profitable even when traded on secondary markets.
The judge's decision ultimately hinged on the definition of investment contracts and the classification of the securities. The tokens in question met the criteria for investment contracts because the investors put money into a joint venture with the expectation of profiting primarily from the efforts of others.
Interestingly, this high-profile ruling was made in absentia, as the defendants did not appear in court. It is reported that Ramani has likely fled the country to avoid prosecution for his actions.
According to the court order, Ramani must pay a fine of twice the amount of his profits. He will also be barred from engaging in such activities in the future. In addition, the Securities and Exchange Commission (SEC) had sought to impose a penalty in the form of prejudgment interest, but the court denied that request.
Last May, the SEC reached a settlement with the Wahi brothers. According to the agency, the case was the first in history to uncover an insider trading scheme involving cryptocurrency.
Legal experts say this could lead to a rethinking of attitudes about which tokens are considered securities. This could potentially affect token trading on centralized cryptocurrency exchanges.
