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During which conversation a fairly large number of HN commenters thought that crypto insider trading wasn't illegal: https://news.ycombinator.com/item?id=31012

by d--b 4y ago

During which conversation a fairly large number of HN commenters thought that crypto insider trading wasn't illegal: https://news.ycombinator.com/item?id=31012837 https://news.ycombinator.com/item?id=31012837

closewith 4y ago
That's a fantastic insight - thanks for the link.
tyre 4y ago
For some nuance, though, partly this has to do with lack of SEC enforcement on crypto as a security. My opinion then would have been that this should be insider trading, crypto should be classified as a security, and also that I wasn’t sure the SEC would classify this as insider trading. Since the definition of insider trading is kind of, “whatever the SEC enforces”, it’s possible to believe that this is a security that was insider traded and also that it’s not “insider trading” in the only meaningful way (the SEC way.)
- game-of-throws 4y ago
  Yeah I was about to say something similar. Our existing insider trading laws don't quite fit this situation, which is why they're being charged with "wire fraud conspiracy" instead of something more specific.
  - deleted 4y ago
    [deleted]
- JumpCrisscross 4y ago
  > the definition of insider trading is kind of, “whatever the SEC enforces” Insider trading is a crime. The SEC cannot bring criminal complaints. Every insider trader who has gone to jail was prosecuted by the DoJ.
  - 3np 4y ago
    According to SEC: https://www.investor.gov/introduction-investing/investing-basics/glossary/insider-trading https://www.investor.gov/introduction-investing/investing-ba... FBI: https://www.fbi.gov/news/stories/insider-trading https://www.fbi.gov/news/stories/insider-trading Only talk about securities. It seems to me as if it would depend a lot on if the digital asset(s) in question count as securities or not.
    - 1jbdg 4y ago
      Nope, insider trading is a type of fraud, they’ll be charged with wire fraud and the question on securities will never arise
      - thomasjudge 4y ago
        The already have been as the DOJ press release states. Also the SEC is filing a civil case, as they do
hailwren 4y ago
If you read the actual SEC filing, you'll note that they're only filing for 7 of the alleged 25 coins that he traded. [1] Even the SEC agrees that this was not insider trading in all 25 instances. "Throughout the relevant period, Nikhil and Ramani repeatedly traded ahead of Coinbase listing announcements, trading in at least 25 tokens. At least seven of the listing announcements described above involved crypto asset securities" 1 - https://www.sec.gov/litigation/complaints/2022/comp-pr2022-127.pdf https://www.sec.gov/litigation/complaints/2022/comp-pr2022-1...
- iskander 4y ago
  Is there a list of all 25 somewhere? This could provide some illumination on what SEC does and does not consider a security.
  - modeless 4y ago
    Or maybe the SEC considers all of them securities but thought that they had the strongest case for these seven and didn't want the distraction of arguing about the other 18. But yeah, would be interesting to see the list.
    - astrange 4y ago
      If SEC considers any of them securities, it's very strange for them to go after a single guy at Coinbase and not the entire company, since they've just declared them an illegal securities exchange. (As opposed to an illegal commodities exchange for bitcoin.)
      - dleavitt 4y ago
        I think maybe it's only strange if you assume the SEC has unlimited money and time. Grandparent comment says it better, but they're likely focusing on cases they think are pretty clear-cut.
        iskander 4y ago
raverbashing 4y ago
Yeah, good luck convincing a judge about that "Well technically" works sometimes. Only sometimes. And people who aren't familiar with SEC rules are not really qualified to say if it's fair game or not.
philipov 4y ago
The DoJ isn't prosecuting them for `Insider Trading`. It's prosecuting them for Wire Fraud against Coinbase. Wire Fraud doesn't require there be a security involved at all.
- spread_love 4y ago
  Thank you, can you elaborate a bit? Insider trading involves trading of a company's securities, correct? Because crypto isn't a security in the SEC's eyes, this doesn't apply? How are they getting them on wire fraud charges? The texts back and forth describing the scheme?
  - philipov 4y ago
    The way I understand it, there is a lot of controversy over whether or not crypto is a security. However, Insider Trading is a type of Fraud, and proving fraud does not require it to be insider trading and does not require crypto to be a security. What makes it Wire Fraud is just that it took place "over the wire", ie on the internet. I think the key to understanding how this is fraud is the fact that they acted on privileged Material Information to the disadvantage of their employer, not the exact nature of how they profited off it. Essentially, they stole company secrets. I thought Hoeg's video on it was good: https://www.youtube.com/watch?v=EafL0w48IAg https://www.youtube.com/watch?v=EafL0w48IAg

by d--b 4y ago

closewith 4y ago

That's a fantastic insight - thanks for the link.

tyre 4y ago

For some nuance, though, partly this has to do with lack of SEC enforcement on crypto as a security. My opinion then would have been that this should be insider trading, crypto should be classified as a security, and also that I wasn’t sure the SEC would classify this as insider trading. Since the definition of insider trading is kind of, “whatever the SEC enforces”, it’s possible to believe that this is a security that was insider traded and also that it’s not “insider trading” in the only meaningful way (the SEC way.)

game-of-throws 4y ago
Yeah I was about to say something similar. Our existing insider trading laws don't quite fit this situation, which is why they're being charged with "wire fraud conspiracy" instead of something more specific.
- deleted 4y ago
  [deleted]
JumpCrisscross 4y ago
> the definition of insider trading is kind of, “whatever the SEC enforces” Insider trading is a crime. The SEC cannot bring criminal complaints. Every insider trader who has gone to jail was prosecuted by the DoJ.
- 3np 4y ago
  According to SEC: https://www.investor.gov/introduction-investing/investing-basics/glossary/insider-trading https://www.investor.gov/introduction-investing/investing-ba... FBI: https://www.fbi.gov/news/stories/insider-trading https://www.fbi.gov/news/stories/insider-trading Only talk about securities. It seems to me as if it would depend a lot on if the digital asset(s) in question count as securities or not.
  - 1jbdg 4y ago
    Nope, insider trading is a type of fraud, they’ll be charged with wire fraud and the question on securities will never arise
    - thomasjudge 4y ago
      The already have been as the DOJ press release states. Also the SEC is filing a civil case, as they do

hailwren 4y ago

If you read the actual SEC filing, you'll note that they're only filing for 7 of the alleged 25 coins that he traded. [1] Even the SEC agrees that this was not insider trading in all 25 instances. "Throughout the relevant period, Nikhil and Ramani repeatedly traded ahead of Coinbase listing announcements, trading in at least 25 tokens. At least seven of the listing announcements described above involved crypto asset securities" 1 - https://www.sec.gov/litigation/complaints/2022/comp-pr2022-127.pdf https://www.sec.gov/litigation/complaints/2022/comp-pr2022-1...

iskander 4y ago
Is there a list of all 25 somewhere? This could provide some illumination on what SEC does and does not consider a security.
- modeless 4y ago
  Or maybe the SEC considers all of them securities but thought that they had the strongest case for these seven and didn't want the distraction of arguing about the other 18. But yeah, would be interesting to see the list.
  - astrange 4y ago
    If SEC considers any of them securities, it's very strange for them to go after a single guy at Coinbase and not the entire company, since they've just declared them an illegal securities exchange. (As opposed to an illegal commodities exchange for bitcoin.)
    - dleavitt 4y ago
      I think maybe it's only strange if you assume the SEC has unlimited money and time. Grandparent comment says it better, but they're likely focusing on cases they think are pretty clear-cut.
      - iskander 4y ago

raverbashing 4y ago

Yeah, good luck convincing a judge about that "Well technically" works sometimes. Only sometimes. And people who aren't familiar with SEC rules are not really qualified to say if it's fair game or not.

philipov 4y ago

The DoJ isn't prosecuting them for `Insider Trading`. It's prosecuting them for Wire Fraud against Coinbase. Wire Fraud doesn't require there be a security involved at all.

spread_love 4y ago
Thank you, can you elaborate a bit? Insider trading involves trading of a company's securities, correct? Because crypto isn't a security in the SEC's eyes, this doesn't apply? How are they getting them on wire fraud charges? The texts back and forth describing the scheme?
- philipov 4y ago
  The way I understand it, there is a lot of controversy over whether or not crypto is a security. However, Insider Trading is a type of Fraud, and proving fraud does not require it to be insider trading and does not require crypto to be a security. What makes it Wire Fraud is just that it took place "over the wire", ie on the internet. I think the key to understanding how this is fraud is the fact that they acted on privileged Material Information to the disadvantage of their employer, not the exact nature of how they profited off it. Essentially, they stole company secrets. I thought Hoeg's video on it was good: https://www.youtube.com/watch?v=EafL0w48IAg https://www.youtube.com/watch?v=EafL0w48IAg