Why the Black Friday Whale’s $192 Million Crypto Trade Was Legal

When I began digging into whether any laws could be used to prosecute wrongdoing in last week’s market leak — if someone traded ahead of President Trump’s post announcing new tariffs on China — the question seemed to hinge on crypto’s classic ambiguity. Was the asset a security, a digital commodity, or something else entirely? That uncertainty alone could make prosecution difficult, as we saw in the OpenSea insider trading trial that was later overturned on appeal. Legal experts initially told me of two main avenues for enforcement: one through the Department of Justice, via wire fraud, and another through the SEC, via insider trading. Then I discovered a third, stranger route — a CFTC rule nicknamed the “Eddie Murphy Rule,” inspired by the 1983 movie “Trading Places.”

In that film, Eddie Murphy and Dan Aykroyd’s characters profit off a stolen crop report for frozen concentrated orange juice. Decades later, regulators banned trading commodities with government data obtained illegally. That’s the scenario the Eddie Murphy Rule covers — and it’s what might apply here. The question now isn’t just who leaked or traded, but whether such a case could even stick. In crypto, where the rules remain fluid, the Wild West still has teeth.

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Why the Black Friday Whale’s $192 Million Crypto Trade Was Legal

Someone made a fortune timing the market crash last Friday, possibly with the use of non-public government info. Here’s why it was probably legal.

When the crypto markets plunged last Friday — just minutes after President Donald Trump announced sweeping new 100% tariffs on Chinese imports — investors were stunned. In less than 30 minutes, more than $19 billion in long positions were liquidated, wiping out weeks of steady gains across the digital assets market.

However, somebody who shorted the market on Hyperliquid made off with $192 million in pure profit.

Rumors are swirling about whether anyone had advance knowledge of Trump’s announcement, so they would know just the right time to put on these sizable positions. But while reporters and investigators around the world are working to identify this pseudonymous trader or traders, here’s the ironic part of the whole episode — they likely did not commit insider trading.

Therefore, not only would these traders likely not face any repercussions, but episodes like this could very well happen again unless lawmakers step in to close certain legal loopholes.

“I think if this was someone who was either on the inside, had advance knowledge or was tipped, it's a tremendous breach of public trust,” said Jason Gottlieb, Chair, Digital Assets, and Chair, White Collar and Regulatory Enforcement at Morrison Cohen LLP, in an interview, while lamenting that it would be tough for a prosecutor to win a case against these traders. “If that is the case, that person should be punished, because they used information that belongs to the public to personally enrich themselves.”

Why a Shady $192 Million Profit Isn’t Insider Trading 

Although insider trading might seem self-explanatory, it actually requires a set of very specific criteria to be met — chief among them being that the asset being traded is a security. Given that the assets that were shorted, bitcoin and ether, are clearly commodities, any traditional insider trading charges under SEC Rule 10b-5, under Section 10(b) of the Securities Exchange Act of 1934, is a non-starter.

Even if the tokens were securities, applying insider trading laws could still be problematic. One former SEC official told Unchained that insider trading  “...requires a fiduciary duty between the insider and whoever trades on the information. So unless you can tie the traders to someone within the administration who had such a duty, it would be tough to make a case.” Proving this step is doubly difficult because government officials do not have the same types of fiduciary duties as business executives. 

Does that mean that crypto trading is lawless and no restrictions on using privileged information in cases such as this exists? Not necessarily, but it requires that cases get much more complicated, and that other charges need to be brought, like wire fraud. “Wire fraud is the most flexible,” said Gottlieb. “Wire fraud is committing some sort of fraud over the wires, and everything blockchain is over the wires.” 

Fuzzy History

Two precedents are particularly helpful in this situation.

In June 2022, the Department of Justice (DOJ) brought a digital asset wire fraud case against an OpenSea employee, describing it as the first-ever digital asset insider trading scheme. Former OpenSea product manager Nathaniel Chastain was accused of using confidential information about which NFTs were scheduled to be featured on OpenSea’s homepage to pre-emptively purchase those NFTs or collections, then profiting by selling them after their value increased following public exposure. 

Then, in July 2022, the DOJ filed another case against a former Coinbase employee involving “insider trading,” but again, the actual charges were wire fraud conspiracy. Notably, the SEC also brought its own case, this time explicitly for insider trading. According to the DOJ, former Coinbase product manager Ishan Wahi tipped his brother and a friend with confidential information about upcoming Coinbase token listings, allowing them to trade dozens of assets ahead of public announcements and collectively earn over $1 million in illegal profits.

Both the OpenSea and Coinbase insider trading cases tested how U.S. law applies to confidential information in digital asset markets, but they reached very different results. In the OpenSea case, Chastain was convicted in 2023 of wire fraud and money laundering for using advance knowledge of which NFTs would appear on OpenSea’s homepage to trade for profit. But on July 31, 2025, the Second Circuit Court of Appeals vacated his conviction, finding that prosecutors failed to show the misused information qualified as “property” with commercial value under the wire fraud statute. The court ruled that ethical breaches alone cannot support such criminal convictions, narrowing the DOJ’s ability to bring similar “crypto insider trading” cases. 

In contrast, the Coinbase case against Ishan Wahi, his brother Nikhil, and their associate Sameer Ramani led to wire fraud conspiracy convictions and SEC settlements. The charges stemmed from tipping and trading on confidential token‑listing data, which the SEC said involved digital assets that were securities. Ishan Wahi received two years in prison and his brother ten months, while both agreed to permanent injunctions and disgorgement. Together, the cases draw a sharp distinction: the Chastain ruling limits wire fraud liability for non‑securitized digital data, while the Wahi precedent reinforces that insider trading theories apply if crypto assets are deemed securities.

However, given the radical change in outlook at the SEC with regards to tokens — when in July SEC Chairman Paul Atkins declared that most digital assets are not securities — it seems unlikely that a similar case would be brought under the Trump administration by the regulator.

The CFTC and the ‘Eddie Murphy Rule’ 

The CFTC does have some rules to police activity akin to insider trading. Interestingly, their origins come from the movie "Trading Places," the 1983 comedy starring Eddie Murphy and Dan Aykroyd, in which two scheming brokers successfully profit by obtaining a stolen government crop report. 

In 2010, one prominent regulator decided that the actions of Eddie Murphy’s character were or should be illegal. Gary Gensler, who was chair of the CFTC at the time, devised CFTC Rule 180.1 to ban the use of inside information for commodities trading. This rule therefore would theoretically cover digital assets that are commodities, such as bitcoin or ether. The CFTC does already have fraud and market manipulation authority when it comes to options or futures. 

CFTC Rule 180.1, adopted in 2010 under then-Chair Gensler, has been used in the context of digital assets, but not to prosecute insider trading–style conduct involving commodities for digital assets. Instead, the CFTC’s enforcement activity under its general antifraud authority has focused on market manipulation and misstatement cases for digital assets, not pure misuse of confidential information. 

“That’s because the CFTC has a different outlook than the SEC when it comes to market regulation,” said former CFTC chairman J. Christopher Giancarlo in an interview. “The SEC focuses on resolving information asymmetries by requiring the sharing of material information held by investment promoters and corporate insiders amongst general investors. The fact that commodities like wheat, corn and oil are not generally offered by a central group of promoters with superior information (Mother Nature doesn’t share her secrets after all) means that market participants need to be able to trade with their own unique proprietary and asymmetric information.”

Examples of the CFTC regulating crypto include the Mango Markets case involving alleged manipulation by trader Avraham Eisenberg, the Tether and Bitfinex settlements over misleading reserve claims, and the Binance enforcement actions tied to illegal derivatives offerings and compliance failures. 

However, the position taken by Acting Chairman Caroline Pham, the CFTC’s sole commissioner, also makes it unlikely that the regulator would employ this rule in a potential insider trading case like this. In September 2023, she publicly dissented in a CFTC enforcement matter that applied Rule 180.1 to non-crypto derivative cases rooted in the misappropriation theory of insider trading. Pham argued that the agency should avoid using securities-style terms like “material nonpublic information (MNPI)” and instead allege “the misappropriation of confidential information in breach of a duty of trust and confidence.​” 

Put another way, the CFTC’s perspective is that MNPI floating around is not enough to bring a case. 

Pham emphasized that Rule 180.1 was not meant to import SEC-style insider trading doctrine wholesale, reflecting the distinction between commodity and securities law. Pham’s dissents have gained visibility in the crypto policy community, as she remains the only current CFTC commissioner actively scrutinizing the agency’s interpretation of its antifraud authority.

Pham did not respond to Unchained’s request for comment prior to publication.

Market Structure Legislation to the Rescue? 

The CLARITY Act, which passed the House of Representatives in July, does include text in section 3 that would amend the Securities Exchange Act of 1934 to police insider trading in “payment stablecoin and digital commodity transactions.”

But the problem may not be solved right away.

One policy person familiar with the current status of the Market Structure bill shared with Unchained that the main focus on market structure has to do with the current fight over DeFi as a result of the recent proposal by Senate Democrats, as reported in Unchained. The other main concern on Capitol Hill is the shutdown, so the source was unaware of any connections as of yet between the crypto crash on Friday and the negotiations over the market structure bill. At this point, it seems like a tall task to complete the legislation before the end of the year.

Unchained reached out to the Senate Banking Committee to see if the flash crash on Friday might impact the status of the current market structure bill under consideration, but did not hear back prior to publication. 

Related content: 

• Landmark Crypto Bill Set to Take a Big Step in the Senate Despite Shutdown 

• How Crypto Insiders Are Sidestepping the Law to Dump on Retail