The Search at Mar-a-Lago

On August 8, the FBI executed a search warrant at Donald Trump’s residence at his Mar-a-Lago resort in Florida. The search followed more than a year of efforts to get Trump to return government documents he had taken with him when he left the White House in January 2021. In the search, agents recovered a large number of classified materials that had been improperly kept at Trump’s residence.

The government’s evaluation of any potential damage to national security resulting from Trump’s retention of these documents is ongoing, as is the criminal investigation into the handling of the documents. But the implications of the search are clear: of all the investigations swirling around the former president, this may be the one that most squarely places him in legal jeopardy.

Documents seized at Mar-a-Lago – FBI Photo

Events Leading Up to the Search at Mar-a-Lago

The National Archives and Records Administration (NARA) has been trying to recover official government records from Trump ever since he left office in January of 2021, amid news reports of moving vans taking documents to Mar-a-Lago.

After a year of negotiations, Trump turned over 15 boxes of documents to NARA in January of 2022. At the time, he and his representatives did not claim any executive privilege related to the documents. Nor did they claim that Trump had declassified any documents.

When NARA reviewed the so-called “fifteen boxes,” they found a lot of classified material mixed in with other papers and personal items. As a result, in May they referred the matter to the Department of Justice for an investigation into the mishandling of classified information. When DOJ reviewed the boxes, it found 184 classified documents, including 25 that were marked Top Secret.

On May 11, believing Trump still had additional documents, DOJ issued a grand jury subpoena for any classified materials at Mar-a-Lago. On June 3, the president’s representatives met with investigators and turned over a single Redweld folder of documents in response to the subpoena. Once again, they did not claim that the documents had been declassified; in fact, they treated them as sensitive materials by wrapping the folder in tape and sealing it.

Trump’s representatives gave the agents a certification, signed by one of Trump’s attorneys, that they had made a “diligent search” and that this was all the classified material that remained. They also showed the agents a storage room where there were additional boxes of documents, but refused to allow the agents to open the boxes to verify that they did not contain any classified materials. The folder they turned over contained 38 more classified documents, including 17 marked Top Secret.

Following the June 3 meeting, the FBI reportedly developed “multiple sources of information” that there were still more documents that had not been turned over. They also developed evidence that “government records were likely concealed and removed from the Storage Room and that efforts were likely taken to obstruct the government’s investigation.”

On August 5, DOJ applied for the search warrant, and it executed the warrant on August 8. They recovered 38 boxes, containers, or other items of evidence. Thirteen of them contained classified material. Some of them were extremely sensitive and classified at high levels such as SCI (Sensitive Compartmented Information).

As the government noted in an August 30 pleading, “That the FBI, in a matter of hours, recovered twice as many documents with classification markings as the ‘diligent search’ that the former President’s counsel and other representatives had weeks to perform calls into serious question the representations made in the June 3 certification and casts doubt on the extent of cooperation in this matter.”

The Criminal Statutes at Issue

The government cited three different criminal statutes in the search warrant, alleging there was probable cause to believe that evidence of those crimes would be found at Mar-a-Lago. These crimes potentially were committed not only by Trump himself, but also by some of his staff or attorneys who were involved with the documents.

18 U.S.C. § 793

The first statute referenced, Title 18 U.S.C. § 793, is part of the Espionage Act of 1917. It has a few different subsections, and the search warrant doesn’t specify which ones the government is focused on. Subsection (e) makes it a crime to be in unauthorized possession of documents or other information “relating to the national defense” with reason to believe that the information could be used to injure the United States or help a foreign nation, and to willfully retain that information and fail to deliver it to the government official entitled to receive it.

Subsection (f) makes it a crime for someone who is otherwise authorized to have national defense information to allow it to be removed from its proper place of custody through gross negligence, or after learning that it has been so removed, to fail to report it.

Both subsections (e) and (f) are ten-year felonies.

Information related to the national defense is broadly construed under this statute. Material that was important enough to be classified, particularly at the higher levels of some of the materials seized at Mar-a-Lago, would likely be considered national defense information.

Under this section the alleged crime is straightforward: Trump and his associates removed national defense information from its proper location, retained it, and failed to turn it over when it was requested by the proper government officials.

18 U.S.C. § 2071

This statute applies to anyone who “willfully and unlawfully” conceals, removes, or carries away any record or document, or other thing, “filed or deposited with any clerk or officer of any court of the United States, or in any public office.”  It’s a three-year felony.

The “filed or deposited with” language has been interpreted broadly. The statute basically applies to any government documents that are supposed to be maintained by some public office, even if they haven’t been formally “filed.” Presidential records that are supposed to be maintained by the National Archives would fall into that category, and classified information certainly would as well.

Once again, the nature of the allegation here would be straightforward: Trump removed documents meant to be maintained at NARA or in other government offices and then concealed them when the government tried to get them back.

18 U.S.C. § 1519

This is an obstruction of justice statute. It applies to anyone who “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object” with the intent to impede a federal investigation or the proper administration of any matter within the federal government’s jurisdiction. The maximum penalty is twenty years in prison.

The allegation here would be that Trump or those working for him concealed the records with the intent to impede either the FBI investigation or the NARA efforts to recover and maintain the documents. Unlike other obstruction of justice statutes, this section applies to investigations and does not require a more formal proceeding such as a trial, grand jury, or Congressional proceeding.

This statute was the subject of one of the more bizarre Supreme Court decisions in recent years, Yates v. United States. In Yates a fishing captain was charged under § 1519 for throwing overboard undersized grouper that were evidence of a violation of fishing regulations. The Court ruled that a fish was not a “tangible object” within the meaning of this statute and that 1519 applies only to objects that contain information, such as computer drives. But that would not be an issues in this case, which clearly involves records and documents within the meaning of the statute.

18 U.S.C. § 1001

This statute, false statements, is not mentioned in the warrant paperwork, but it is suggested by the recitation of facts in the government papers. The statute prohibits knowingly making any materially false statement in any matter within the jurisdiction of the federal government. It’s punishable by up to five years.

Recall that in June, Trump’s attorney represented in writing that all of the requested documents had been turned over and that a “diligent search” had been conducted for any additional classified documents. As the government noted in its August 30 filing, the fact that the FBI quickly found so many additional classified documents calls into question the veracity of this certification.  

If the government develops evidence that the attorney, Trump himself, or others working for Trump knowingly made a false certification that all documents were turned over, that could implicate not only obstruction of justice but also the false statements statute.

Evidence of Trump’s Knowledge

In a criminal case, a potential defense for Trump presumably would have been a lack of knowledge about the documents. He might have tried to blame it all on his advisors, saying they must have mishandled his presidential records without his knowledge. But the evidence that has emerged so far has made such a defense basically impossible.

First is just the sheer volume of materials recovered. One might plausibly deny knowing about a stray document or two. But when we are talking about several dozen boxes of documents — more than a dozen containing classified materials — being kept in your home, it becomes much more difficult to claim you didn’t know they were there.

Another factor is where some of the documents were located. The government’s August 30 filing notes that some of the classified documents were found in Trump’s personal office, including in his desk drawer. A few were in a drawer that also contained Trump’s passports. If the classified materials are in your own desk and intermingled with your personal documents, it becomes much harder to deny that you knew about them.

The search warrant affidavit also noted that some of the classified materials turned over in January appeared to have Trump’s handwritten notes on them. This too would be evidence of Trump’s knowledge that he had the documents – although one issue might be proving when such notes were made. Trump could claim they were written while he was still in the White House.

Witnesses will also be important. The government may have developed witnesses who can testify about conversations with Trump concerning the presence of the documents and that he did not have a right to keep them at his home.

But the most damning evidence of Trump’s knowledge is his own words since the search took place. For example, after the search he said this on his platform Truth Social:

This statement admits he knew the documents were there, and that they were in “cartons.” Some of his allies on Fox News have tried to suggest that the FBI may have planted the documents, but this statement undermines any such claim.

Then there’s this one:

The statement, “Lucky I declassified” is an admission not only that he knew he had the documents but that he knew they were classified, and implying that he knew it would be improper for him to have them if they were not declassified.

Trump’s inability to stay quiet must be maddening for his attorneys. He is undermining his own potential defenses.

The Declassification Argument

Trump and some of his allies have claimed there was no problem with him keeping the documents because Trump issued some kind of blanket declassification of all the documents before taking them. Presidents (although not former presidents) do have broad power to declassify information, but in this case that will not help Trump.

Legally, the declassification claim is irrelevant. If you review the criminal statutes discussed above, you will see that none of them require that the documents removed or concealed were classified. Trump, while still president, could have formally and officially declassified even the most sensitive information (although that would have been a gross dereliction of duty) and it would make no difference for purposes of the crimes being investigated.

Factually, there is no evidence of this purported declassification. The president can’t just wave a magic wand and declare something declassified; there would be paperwork and notations on the documents themselves. As far as we know, none of that exists. As the government has pointed out in its papers, at no time during the negotiations with NARA and in none of their court pleadings have Trump’s attorneys ever actually claimed that the documents were declassified.

The declassification argument is just a smokescreen. It didn’t happen, and even if it did, it wouldn’t matter. To be sure, the fact that the documents were classified is important in terms of the seriousness of the case. If the documents had consisted only of the guest lists for White House state dinners, there’s no way the government would have taken the dramatic step of executing a search warrant at a former president’s home. That the documents contained some of the country’s most sensitive information is an argument in favor of pursuing a criminal case – but it’s not a legal requirement for these potential crimes.

What Happens Next

It’s going to be very interesting to watch the developments in this case. There is some legal wrangling going on now over whether a court should appoint a Special Master to review the documents for any claims of executive privilege or attorney-client privilege, but that’s not going to make a big difference in the criminal case. Thanks to the president’s lawyers waiting two weeks to act, the government has already finished reviewing the documents and already knows what it has.

It will take some time for prosecutors and agents to analyze the recovered materials, complete the investigation, and evaluate any potential criminal charges. But it’s clear that this is an active, serious investigation that poses a real threat to the former president. And based on the government’s reference to witnesses and sources of information, someone inside the former president’s circle is talking – maybe multiple someones.

Trump’s attorneys are in a bit of a bind. Those who were involved in the negotiations with NARA and DOJ are likely going to have to withdraw from their representation of Trump. At a minimum, they are witnesses concerning the critical events in question. Depending on how the evidence develops, some of them could face legal jeopardy themselves. As someone joked on social media, maybe MAGA should stand for, “Make Attorneys Get Attorneys.”

There are almost certainly others, in addition to Trump himself, with criminal exposure here. It would not be surprising to see prosecutors build a case by persuading some of the lower-level people involved to plead guilty and cooperate against those higher up the ladder.

Even if prosecutors develop a compelling case, they might hesitate to proceed if prosecution would require revealing the secrets contained in some of the documents that Trump retained. This is sometimes referred to as “graymail” – the idea that a defendant can force prosecutors to drop a case involving classified information because putting the defendant on trial would require disclosing that information to the defense and the public. Depending on the nature of the classified information and the structure of any charges, the government may decide that a criminal prosecution should be declined in order to preserve the confidentiality of that information.

Al Capone

After the Mueller report, the attempted coup on January 6, 2021 and all of the other investigations surrounding Trump, indicting him for mishandling of classified information would feel a bit like prosecuting Al Capone for tax evasion. Even if prosecutors can develop a compelling case, deciding to indict a former president for the first time in our history would be a monumental step. In this and other investigations involving Trump, attorney general Merrick Garland will have to wrestle with all of the legal, social, and policy implications of bringing — or not bringing — such a case. I’m glad I don’t have to make that call.

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Problems with the NFT “Insider Trading” Case

Last month the U.S. Attorney’s office for the Southern District of New York announced, with considerable fanfare, that it had brought charges in the “first ever digital asset insider trading scheme.” Prosecutors charged the defendant, Nathaniel Chastain, with using inside information to purchase NFTs that were about to be featured on his employer’s digital marketplace and then resell them at a substantial profit.

The Department of Justice may have been looking to make a splash and send a signal that it is cracking down on crime related to crypto assets. But despite the flashy headlines, this is not an insider trading case. In fact, it’s not clear it should be a criminal case at all.

Picture of different cryptocurrencies

Facts of the Chastain Case

Non-Fungible Tokens, or “NFTs,” are digital assets that are stored on a blockchain, a digital, centralized ledger of transactions. NFTs are unique digital identifier codes that are associated with a particular digital object, such as a piece of digital art. Although digital images can be reproduced, only the owner of the NFT can be said to own the original digital work, which is considered more valuable – sort of like the difference between owning an original Renoir and a print. The Bored Ape Yacht Club, which features thousands of NFTs of cartoon ape characters, is a well-known example.

Chastain worked at OpenSea, the largest online marketplace for the purchase and sale of NFTs. Beginning in May 2021, OpenSea regularly featured particular NFTs at the top of its website’s homepage. Once featured on OpenSea, an NFT usually would rapidly increase in value due to a sudden rise in popularity and demand.

According to the indictment, Chastain was in charge of selecting which NFTs would be featured on OpenSea’s homepage. As OpenSea’s employee, he had an obligation to keep this company information confidential and not exploit it for his own use. But between June and September 2021 he allegedly used this advance knowledge to purchase dozens of NFTs shortly before they were featured on OpenSea. He then sold them at a profit after they were featured and their value rose.

This was not a big-dollar case. The indictment doesn’t specify how much money was involved (which itself is a bit unusual). But in court when he was arraigned, his attorneys claimed that Chastain made only about $65,000 from the scheme.

An interesting aspect of this case is that it appears others in the Crypto-NFT community were the first to figure out what was going on and flag it publicly:

This apparently led OpenSea to fire Chastain and ultimately led to his prosecution. This was possible because what happens on a blockchain is basically public, if you know where to look. (That may have implications for the money laundering charge, as discussed below.)

The Definition of Insider Trading

The very first line of the indictment claims, “This case concerns insider trading in Non-Fungible Tokens or ‘NFTs’ on OpenSea , the largest online marketplace for the purchase and sale of NFTs.” But this is not an insider trading case – at least, not as that term has been used for decades.

Insider trading involves using material, nonpublic information to buy or sell securities in violation of a duty of trust and confidence. Classic or traditional insider trading involves a corporate officer using nonpublic company information to trade shares in her own company, in violation of the duty she owes to her shareholders. Under the “misappropriation theory,” someone who is not a corporate insider but who uses nonpublic information to trade securities in violation of some duty of trust and confidence may also be guilty of insider trading. That duty may arise from trusted relationships such as that between attorney and client or between an employee and an employer.

The Chastain indictment uses some misappropriation theory language that makes the case sound like insider trading. It alleges that Chastain “misappropriated information from his employer, OpenSea, in violation of a duty of trust and confidence that he owed the company, and then used that information to buy and sell the NFTs.”

In an insider trading case the “victim” is the investing public; it’s really a crime against the securities markets. In a true misappropriation theory case the crime is not the breach of a duty (to an employer, in this case) – it’s using the information obtained via that breach to then buy or sell securities. But in this case the government has alleged that the victim is Chastain’s employer, OpenSea. They have charged Chastain with defrauding OpenSea by taking confidential company information and converting it to his own use.

The bull sculpture on Wall Street

NFTs Are Not Securities – and This Isn’t Insider Trading

Insider trading is a species of securities fraud. It’s a crime against the public securities market that damages investor confidence in those markets. As such, it is typically charged as a violation of the Securities Exchange Act of 1934, specifically 15 U.S.C. § 78j and Rule 10b-5 of the Securities Exchange Commission, which prohibit using any manipulative or deceptive device in connection with the purchase or sale of a security. Insider trading may also be charged under a more recent statute, 18 U.S.C. 1348, which also applies to fraud in connection with publicly-traded securities.

The first requirement of these charges is that the fraud was in connection with the purchase or sale of a “security.” But NFTs generally are not considered securities for purposes of these laws.

NFTs obviously are not publicly-listed securities traded on stock exchanges. But other kinds of investments may also qualify as securities under some circumstances. To determine whether an investment is a security, courts apply what is known as the Howey test, named for an early Supreme Court case. Under that test, characteristics of a security include a common enterprise or horizontal connection among various investors whose fortunes are tied to each other, and a vertical connection between investors and the promoters of the investment, with investors depending on profits that will be derived from the efforts of others. Think of the different shareholders investing in a company as the classic example.

Some crypto assets such as cryptocurrencies could potentially qualify as securities — that is currently a matter of considerable debate and uncertainty. But NFTs are more like collectibles or artwork. The closest analogy is buying a painting. If I buy an individual work of art, I am not involved in a common enterprise with any other investors. I may hope that it will increase in value, but I’m not depending on the work of others to make that happen. So when I buy my original Renoir, I am not purchasing a “security” under the Howey test.

Whether the NFTs sold on OpenSea qualify as securities might be a legal issue fought out in some future case (although I think the answer is pretty clear), but it’s not going to be an issue in the Chastain case. For despite calling this an “insider trading” prosecution, the government has not alleged that the NFTs Chastain bought and sold were securities.

If we are not talking about securities, then securities fraud charges — including insider trading — are not an option. And indeed, prosecutors have not employed the statutes that are used to prosecute insider trading. They did not charge Chastain with violating the Securities Exchange Act or other securities fraud statutes. Instead, they charged him with wire fraud.

A final indication that this is not a securities fraud case is the absence of the Securities Exchange Commission. Typically a securities fraud prosecution would involve investigators and agents from the SEC. Here the case is being pursued only by the FBI, working with the DOJ prosecutors.

In short – this is not an insider trading case, despite the headlines and indictment language to the contrary.

Carpenter v. United States

So if this is not an insider trading case, what kind of case is it? Prosecutors have charged Chastain with defrauding his employer, OpenSea, by taking its confidential business information and using that information for his own benefit. The lead charge is good old wire fraud, 18 U.S.C. § 1343 – the prosecutor’s best friend.

There’s no allegation that Chastain harmed any of those who purchased the NFTs after he bought them, or that he owed them any kind of duty. And there’s no evidence that they were actually harmed, since Chastain’s actions didn’t drive up the price and presumably they would have bought the featured NFT regardless of who owned it.

At a court hearing, prosecutors alleged that the landmark 1987 Supreme Court case of Carpenter v. United States supports the wire fraud charge. Carpenter involved a reporter at the Wall Street Journal named R. Foster Winans who wrote a column called “Heard on the Street.” Because of the column’s influence, the stock price of companies he discussed could be expected to rise or fall in response to its publication. Winans entered into a scheme with some stockbrokers to buy and sell stocks before the column was published, using his advance knowledge of the column’s contents. They then profited from changes in the stock prices after the column was published.

Unlike Chastain, Winans actually was prosecuted for insider trading under the misappropriation theory, with the government alleging he had misappropriated the column information in violation of his duty to the Journal. That conviction was upheld by the Second Circuit Court of Appeals, but the Supreme Court evenly divided on the question. When that happens the judgment is affirmed but the case has no value as precedent. (The Supreme Court did not fully embrace the misappropriation theory until ten years later in United States v. O’Hagan.)

But as an alternative theory, prosecutors charged Winans with mail and wire fraud. They alleged he had defrauded the Journal of its intangible business property, in the form of the content of the upcoming column. Unlike with the securities fraud charge, in the mail fraud charge the victim was Winans’ employer, the Journal. His use of the information in the upcoming columns, prosecutors argued, deprived the Journal of its exclusive right to its confidential business property. The Supreme Court upheld this basis of criminal liability.

Image of US Supreme Court, which decided the Bob McDonnell case
United States Supreme Court

Were OpenSea’s Business Plans Property?

On its face, the Chastain case does sound a lot like Carpenter. But prosecutors may face one significant hurdle: proving that the information used by Chastain amounted to “property” for purposes of wire fraud.

The Supreme Court has repeatedly held that fraud requires that the defendant deprived the victim of property. Economic or business interests that do not constitute property cannot form the basis of a fraud charge. The Court’s trend for the past few decades — ever since Carpenter, in fact — has been to limit the reach of the federal fraud statutes by narrowly interpreting this property requirement.

The most recent example was the Court’s 2020 decision in the “Bridgegate” case, Kelly v. United States. There the Court unanimously rejected the government’s theory that the defendants had defrauded the New York/New Jersey Port Authority through a scheme to close traffic lanes on the George Washington Bridge. The Court held that the Port Authority’s power to control access to the bridge, the power of “allocation, exclusion, and control” – although undoubtedly valuable — was not a property interest for purposes of federal fraud laws.

In Carpenter, Winans had argued that the content of the upcoming column was not a property interest and was too intangible to form the basis of a fraud charge. But the Court rejected that claim, holding that the contents of the column amounted to intangible business property, akin to intellectual property such as patents or copyrights.

Prosecutors will argue that Chastain likewise misappropriated the intangible business property of OpenSea. But it’s not clear that argument will fly. A good definition of “property” is a bundle of rights in something that can be possessed, exclusively enjoyed, and transferred to others. That was true of the contents of the “Heard on the Street” column: the Journal owned it exclusively, controlled it, and could have transferred it — by selling the content to another publication, for example. The contents of the column were thus intangible property akin to other intangibles such as patents, which can be exclusively enjoyed or licensed or sold to others.

It’s not clear this is true of OpenSea’s plans for its homepage. The internal plan regarding what NFT to feature is not an asset that could be sold or licensed to someone else. That information may be valuable to OpenSea and it may wish to keep it confidential, but that does not mean it is a property interest for purposes of federal fraud laws. Again, misuse of such information might support an insider trading charge — if we were talking about trading securities. But I’d argue that misuse of internal company plans does not amount to property fraud.

To prove wire fraud, prosecutors will have to prove not merely that Chastain improperly used OpenSea’s private business information, but that he deprived the company of property. I think that will be an uphill battle.

The “Loss of Control” Theory

It’s possible prosecutors intend to rely on the “loss of control” theory to argue that Chastain engaged in fraud. That theory holds that a defendant engages in fraud when he deprives a victim of potentially valuable information that would help the victim decide how to use his assets. The government’s theory might be that Chastain, by deceiving OpenSea and concealing his misuse of its business information, deprived OpenSea of valuable information it otherwise would have use to decide how to control its website, or its business in general.

This “loss of control” theory has been controversial for years. The Second Circuit (where the Southern District of New York is located) has repeatedly approved it, while other circuit courts have disagreed and held it does not amount to fraud. On the final day of its most recent term, the Supreme Court finally granted review in a case, Ciminelli v. United States, where the question presented is whether “loss of control” is a valid fraud theory. In line with the trend over recent decades, I expect the Supreme Court is going to say no. As a result, even if the prosecutors in Chastain were hoping to rely on the theory, that may become impossible.

Picture of $100 bills on a clothesline

The Money Laundering Charge

Prosecutors also charged Chastain with one count of money laundering for allegedly using anonymous OpenSea accounts, rather than the account in his own name, to conceal his purchase and sale of various NFTs. The indictment is pretty vague on this point, but it’s not clear that the money laundering charge will hold up either.

I’ve discussed this issue in connection with other prosecutions, including the Varsity Blues case. Just because you use secret bank accounts or take other sneaky steps to try to conceal what you are doing, that does not constitute money laundering. Money laundering requires that the transactions be in criminal proceeds – funds generated by another criminal activity. In other words, in order to launder money, it needs to be “dirty” in the first place. If Chastain purchased NFTs using his salary or other “clean funds,” that would not be money laundering just because he used an anonymous OpenSea account to do it.

Another crypto-related wrinkle in the money laundering charge is that transactions on a blockchain are public – indeed, that is one of blockchain’s central features. That explains how others in the crypto community were so easily able to see what Chastain was doing and raise questions about it. Given that, does using other blockchain accounts really amount to an effort to conceal transactions sufficient to support a money laundering charge?

It may be that prosecutors will allege that once Chastain bought and sold the first NFTs, all subsequent purchases and sales used the allegedly criminal proceeds of those early transactions. But that would still leave the issue of whether there was really any concealment, given the public nature of blockchain transactions. Again, the indictment is not very specific so it remains to be seen – but as of now, I have my doubts about the money laundering charge as well.

Employee Misconduct Is Not Necessarily Fraud

The indictment alleges that Chastain had a duty to OpenSea to keep the information about featured NFTs confidential and that he violated that duty. But that merely establishes that he was a bad employee. Employee misconduct is not necessarily criminal. As another court of appeals once held, the federal fraud statutes are not supposed to serve as a “draconian personnel regulation.” Chastain may have deserved to lose his job and to be treated with disdain in the crypto community. That doesn’t mean he deserves to go to jail.

I’ll be watching to see how this case unfolds. But if federal prosecutors were trying to show that they are cracking down on crypto-related crime, they picked a pretty lame showcase.

Update: After this post was written, on July 21 the same U.S. Attorney’s Office announced the first “insider trading” case involving cryptocurrency. Prosecutors charged a former Coinbase employee, Ishan Wahi, and two co-defendants with trading on information about which tokens would be listed on Coinbase’s exchange. This case has the same issues discussed above: although prosecutors called it “insider trading,” it really isn’t. Prosecutors have charged wire fraud, not securities fraud, and will face the same hurdles. In Wahi, the SEC has also filed a civil complaint, alleging that the tokens traded do qualify as “securities.” But in the criminal case, just as in Chastain, prosecutors have not charged securities fraud and have not alleged that the cryptocurrencies were securities.

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