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Banks with employees covertly texting about official business on apps like Signal, WhatsApp, and iMessage have been caught red-handed. Now federal agencies are charging banks with violating laws requiring recordkeeping on all business matters.

Today, the SEC and the Commodity Futures Trading Commission (CFTC) fined 11 firms a combined $549 million for what the SEC described as "widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications."

Wells Fargo was hit with the biggest fines, agreeing to pay the SEC a $125 million penalty and the CFTC another $75 million. Fines for other firms—including Bank of Montreal, BMO Capital Markets Corp., BNP Paribas, Houlihan Lokey Capital, Inc., Mizuho Securities USA, Moelis & Company LLC, SMBC Nikko Securities America, Inc., Société Générale, and Wedbush Securities Inc.—ranged between $9 million and $75 million.

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Yesterday, a former Coinbase product manager, Ishan Wahi, was sentenced to two years in prison for running the first cryptocurrency insider trading scheme investigated by the United States Department of Justice.

Wahi had pleaded guilty after Coinbase and the FBI found that he provided confidential information on upcoming Coinbase crypto asset listings to his brother, Nikhil, and his friend Sameer Ramani. The multiple tipoffs led to profits of approximately $1.5 million as the men went undetected for 10 months, trading 55 digital assets ahead of Coinbase listing announcements that generally caused huge spikes in asset market valuation.

The US attorney for the Southern District of New York, Damian Williams, condemned Wahi's actions, saying that he "violated the trust placed in him by his employer by tipping others with valuable confidential information regarding Coinbase’s planned token listings."

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Late Monday, legally embroiled FTX founder Sam Bankman-Fried moved to dismiss the majority of criminal charges lobbed against him by the United States government after his cryptocurrency exchange went bankrupt in 2022.

In documents filed in a Manhattan federal court, the law firm Sullivan & Cromwell shared Bankman-Fried's first official legal defense. Lawyers accused the US of a "troubling" and "classic rush to judgment," claiming that the government didn't even wait to receive "millions of documents" and "other evidence" against Bankman-Fried before "improperly seeking" to turn "civil and regulatory issues into federal crimes."

After FTX's collapse last year, federal prosecutors acted quickly to intervene, within a month alleging that Bankman-Fried was stealing billions in customer funds , defrauding investors, committing bank and wire fraud, providing improper loans, misleading lenders, transmitting money without a license, making illegal campaign contributions, bribing China officials , and other crimes. Through it all, Bankman-Fried has pleaded not guilty. Now, in his motion to dismiss, Bankman-Fried has requested an oral argument to "fight these baseless charges" and "clear his name." He's asking the court to dismiss 10 out of 13 charges, arguing that federal prosecutors have failed to substantiate most of their claims.

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If you have paid casual attention to crypto news over the past few years, you probably have a sense that the crypto market is unregulated—a tech-driven Wild West in which the rules of traditional finance do not apply.

If you were Ishan Wahi, however, you would probably not have that sense.

Wahi worked at Coinbase, a leading crypto exchange, where he had a view into which tokens the platform planned to list for trading—an event that causes those assets to spike in value. According to the US Department of Justice, Wahi used that knowledge to buy those assets before the listings, then sell them for big profits. In July, the DOJ announced that it had indicted Wahi, along with two associates, in what it billed as the “first ever cryptocurrency insider trading tipping scheme.” If convicted, the defendants could face decades in federal prison.

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The chair of the US Securities and Exchange Commission is warning that cryptocurrency trading platforms are putting their own survival at risk unless they heed his call to work within the nation’s regulatory framework.

Gary Gensler told the Financial Times that while he remained “technology neutral,” crypto assets were no different than any others when it came to such public policy imperatives as investor protection, guarding against illicit activity and maintaining financial stability.

“At about $2 trillion of value worldwide, it’s at the level and the nature that if it’s going to have any relevance five and 10 years from now, it’s going to be within a public policy framework,” he said. “History just tells you, it doesn’t last long outside. Finance is about trust, ultimately.”

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