Judge Grants SEC’s Request for Default Judgement Against Former Coinbase Employee Charged with Insider Trading

Table of Contents

• Sameer Ramani Appears to Have Fled the US
• Judge Lin Supports the SEC’s Securities Claims
• Coinbase Chief Legal Officer Comments on Default Judgement

Judge Tana Lin partially granted the SEC’s motion for a default judgment against Sameer Ramani, one of the defendants in the case involving a former Coinbase product manager charged with insider trading and wire fraud.

Judge Tana Lin of the US District Court of Western Washington at Seattle partially satisfied the US Securities and Exchange Commission’s (SEC) request for a default judgment against Sameer Ramani. Ramani is one of the defendants in the case against brothers Ishan and Nikhil Wahi, who were charged with insider trading and wire fraud. 

Sameer Ramani Appears to Have Fled the US

Judge Lin partially satisfied the SEC’s request for a default judgment against Ramani, one of the defendants in the case against former Coinbase employee Ishan Wahi. The SEC requested the court grant a default judgment against Ramani who appears to have fled the US. The Department of Justice charged Ishan Wahi, his brother Nikhil, and Mr Ramani with “wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in cryptocurrencies” in 2022.

According to the charges against the defendants, Ishan Wahi tipped off his brother Nikhil and friend Sameer Ramani “regarding crypto assets that were going to be listed on Coinbase exchanges.” 

In separate charges brought by the SEC, the agency claimed Nikhil Wahi and Sameer Ramani purchased at least 25 crypto assets, of which at least nine were securities, and sold them for a profit shortly after the listing announcements. According to the SEC, the insider trading scheme generated more than $1.1 million in illicit profits. 

Both Ishan and Nikhil Wahi pled guilty to the charges in 2023. The Wahi brothers agreed to settle the charges by the SEC that they engaged in insider trading relating to at least nine securities. 

Judge Lin Supports the SEC’s Securities Claims

Judge Lin agreed to the SEC’s request for default judgment and found that the secondary sales of the cryptocurrencies involved in the matter were securities. The securities agency argued the nine tokens fell under the definition of an investment contract because Mr Ramani had a “reasonable expectation of profit derived from the efforts of others.” The rules for granting a default judgment required Judge Lin to acknowledge the SEC’s entire argument.

The nine tokens claimed to be securities are Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX and XYO. 

In her order, the judge agreed to the SEC’s demands for a permanent injunction against Sameer Ramani and civil penalties and disgorgement. Judge Lin, however, disagreed. Ramani should pay prejudgement interest on the disgorged funds, which were estimated to amount to $1.5 million. 

In her order acknowledging the securities, Judge Lin said:

“The allegations in the FAC establish that the tokens Ramani traded were offered and sold as investment contracts and, thus, were securities.”

Judge Lin explained:

“Thus, under Howey, all of the crypto assets that Ramani purchased and traded were investment contracts.”

The judge further said default judgment was granted as Ramani “appears to have fled the country” and is “therefore not a result of excusable neglect” but instead due to his “desire to avoid the consequences of his actions.” 

Coinbase Chief Legal Officer Comments on Default Judgement

Paul Grewal, Chief Legal Officer at Coinbase, commented on X (formerly Twitter) highlighting the default's importance. Grewal explained because Mr Ramani was not present in court to offer his side of the case, no one could push back or refute the SEC’s allegations.

Grewal stated:

“The judge here confirmed in her order that she only considered the SEC’s filings and did not consider any amicus briefs or other papers showing the fallacy of the SEC’s arguments. 4/6”

Adding: 

All of this is to say that in seeking default the SEC was pushing against a completely open door. It’s an example why courts generally do not give collateral estoppel effect to default judgments in other cases. They are not worth anything as precedent or persuasion. 5/6

— paulgrewal.eth (@iampaulgrewal) March 3, 2024

Grewal concluded:

“Not only is there no one pushing back on anything the SEC says, the judge is required under the applicable rule to take everything the SEC says in the complaint as true. No matter how far fetched or plain wrong it is.” 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.