Key Takeaways:
- A former Coinbase senior employee has been charged with insider trading
- According to the Department of Justice and the SEC reports, he leaked confidential information to his brother and friend
- This marks the first insider trading charge involving cryptocurrencies
YEREVAN (CoinChapter.com) — Federal authorities in the United States have arrested a former Coinbase manager and two others on charges of crypto insider trading. The US Securities and Exchange Commission (SEC) accused Ishan Wahi of leaking confidential information to his brother and his friend.
As a result, they reaped illicit profits amounting to more than $1.1 million. The arrest marks the first-ever cryptocurrency insider-trading case to date.
In 2021, Nate Chastain, Head of Product at the largest Nonfungible token (NFT) marketplace OpenSea, was also accused of insider trading.
The U.S. Department of Justice charged him last month for using confidential information to illegally reap illegal profits.
“Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street,”
Damian Williams, a U.S. Attorney for the Southern District of New York, stated in the release.
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The Coinbase insider trading as it happened
32 years old Ishan Wahi was a product managers of Coinbase Global, one of the largest crypto exchanges in the world. Owing to his position, he was among the handful of employees who had access to confidential information.
He, therefore, knew details about the various assets that were soon to be listed on the exchange.
According to the charge sheet, Wahi informed his brother Nikhil Wahi and their friend, Sameer Ramani, of the upcoming listings. Armed with this knowledge, they were able to conduct favorable trades, giving them an advantage over others.
“From at least June 2021 to April 2022… Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements for a profit,”
the SEC press release reads.
In April of 2022, crypto influencer Cobie tweeted about an Ethereum (ETH) wallet that had purchased “hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published.”
His allegation caught the attention of Philip Martin, Coinbase’s chief security officer. Responding to Cobie, Martin informed that they had initiated an investigation on the matter.
As the DOJ filing suggests, Wahi tried to flee the country on the day of his scheduled meeting with Martin. However, the law enforcement authorities stopped him and prevented him from leaving the USA.
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The crypto exchange’s CEO reacts to the arrests
Brian Armstrong, Co-founder and CEO of Coinbase, also commented on the news. Giving details of their collaboration with law enforcement authorities, Armstrong claimed his team will not tolerate such activities.
“This is a great reminder for everyone in crypto, and at Coinbase, that frontrunning is illegal and erodes trust. We will investigate and refer bad actors to law enforcement, and they will face real legal consequences including serving prison time,”
the Coinbase CEO wrote.
The authorities have charged Wahi with two counts of wire fraud conspiracy and two counts of wire fraud. Each of these charges carries a maximum sentence of 20 years.
Meanwhile, the DOJ has charged his brother and his friend with one count of wire fraud conspiracy and one count of wire fraud, again with a maximum sentence of 20 years.
