Significant parallel actions commenced this week by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) bring crypto fraud enforcement into the spotlight, with the SEC alleging that multiple tokens listed on Coinbase are securities. In its first insider trading case of “crypto asset securities,” the SEC charged a former Coinbase product manager, his brother and his friend for perpetrating a scheme to trade crypto assets that the SEC alleges are securities on the basis of confidential nonpublic information. The DOJ brought its first cryptocurrency insider trading tipping scheme case by charging the same three individuals with conspiracy and wire fraud in connection with the alleged insider trading. This case comes on the heels of the DOJ’s first insider trading case regarding a non-fungible token (NFT).
Key Points
- Of the at least 25 crypto assets that were allegedly traded on the basis of material nonpublic information, the SEC alleges nine are securities, of which seven are listed on Coinbase.
- The SEC’s Complaint offers numerous specific examples of the type of activities the SEC will interpret as indicative that a crypto asset is a security.
- The DOJ Indictment and SEC’s Complaint indicate that U.S. enforcement agencies continue to leverage enhanced investigation techniques and information gained from both U.S. and foreign companies servicing the crypto markets to assist in bringing crypto enforcement actions.