Former Coinbase employee and his brother settle with the SEC, which again dodges proving whether cryptocurrencies are securities

Ishan Wahi, a former product manager, oversaw the coordination of public announcements on which coins would be added to the exchange, after which they often spiked. The agency alleged that he provided this insider information to his brother, Nikhil Wahi, and a friend, Sameer Ramani, so they could personally profit.

Nikhil Wahi and Ramani purchased and then sold 25 cryptocurrencies, according to the SEC, which said nine among them qualified as securities. The settlement doesn’t require the agency to name which ones, and according to a court filing, the Wahi brothers agreed not to deny the allegations.

An attorney for the Wahi brothers declined to comment when reached by Fortune.

Ishan and Nikhil already have been handed a two-year and a 10-month sentence, respectively, in criminal court, and the SEC did not seek civil penalties. The pair also will not face a fine, but they have been ordered to give up their illicit profits, including 10.97 Ether and 9,440 Tether—about $30,300 for Ishan Wahi and $892,500 for Nikhil Wahi.

The SEC’s settlement with the Wahis shows how the agency is continuing to level accusations of insider trading, a charge that requires dealing in securities under the Howey Test, without proving whether the crypto assets involved actually are securities.

For any clarity on what types of digital assets are securities, investors may need to wait for the conclusion of a lawsuit against NFT company Dapper Labs. In the class action lawsuit Friel v. Dapper Labs, a judge found merit in plaintiff Jeeun Friel’s allegation that the NFT company’s sports-related “Moments” digital collectibles are unregistered securities. The matter will be settled in court, but the judge found that the plaintiffs argued this well enough for the case to go forward.

Despite the SEC scoring a settlement against the Wahi brothers, Rodrigo Seira, counsel at the crypto-focused investment firm Paradigm, said in a Twitter thread that the settlement was a “complete surrender” by the agency. Paradigm filed a brief supporting the brothers.

The @SECGov just entered a proposed settlement in their case against Ishan Wahi, the former Coinbase employee, which is a complete surrender and shows the weakness in the SEC’s theories about secondary market trading of crypto

This is a meaningful development for the industry

— Rodrigo (@RSSH273) May 30, 2023

In his series of tweets, Seira said that because Ishan Wahi pushed back on the SEC’s claim that tokens trading on the secondary market were securities, the agency essentially folded, resulting in a settlement of little substance.

The agency still claimed victory.

“While the technologies at issue in this case may be new, the conduct is not,” Gurbir S. Grewal, director of the SEC’s division of enforcement,” said in a statement. “We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple.”