Former Coinbase employee charged with crypto insider trading
A former employee at Coinbase illegally told his brother and friend about new cryptocurrencies soon to be available on the trading platform, federal authorities alleged Thursday.
The Securities and Exchange Commission has charged Ishan Wahi, 32, his brother Nikhil, 26, and friend Sameer Ramani, 33, with insider trading. With Ishan Wahi's help, Ramani and Nikhil Wahi bought at least 25 crypto assets before Coinbase announced their arrival and then sold the assets for a $1.1 million profit, the SEC said. The trio also face wire fraud charges by U.S. Department of Justice.
"Our message with these charges is clear: Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street," U.S. Attorney Damian Williams said in a statement.
The federal charges mark a rare case of insider trading in the emerging cryptocurrency sector. Most insider trading cases center on sharing confidential information about publicly traded stocks and other traditional securities.
"We are not concerned with labels, but rather the economic realities of an offering," Gurbir Grewal, SEC enforcement director, said in a statement. "In this case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase."
Federal regulators said Ishan Wahi worked as a Coinbase product manager on the asset listing team, which meant he had knowledge of which crypto assets were being offered soon. Between August 2021 and May 2022, Ishan Wahi was part of a private messaging group at Coinbase where employees shared exact launch dates for new crypto assets, authorities said. According to government officials, he allegedly shared that company information with his brother or friend at least 14 times between June 2021 and April 2022.
Coinbase's suspicions
Coinbase officials said they suspected Ishan Wahi was engaging in illegal activity and started investigating him in April, Coinbase's chief security officer, Philip Martin, said in a series of tweets posted Thursday.
"Once we collected sufficient evidence to be confident in our suspicions, we provided information about these individuals to the DOJ and terminated our employee," Coinbase CEO Brian Armstrong said in a blog post.
1/ As promised, I’m now able to share an update on this investigation. As I noted previously, this kind of investigation is not quick, but is critical to maintaining a level playing field. https://t.co/0O5BBBRidk
— Philip Martin (@SecurityGuyPhil) July 21, 2022
Justice Department officials said Ishan Wahi tried to flee the U.S. and fly to India one month after Coinbase launched its probe. Law enforcement agents stopped him from boarding his one-way flight to New Delhi on May 16, prosecutors said. Both Wahi brothers were arrested Thursday in Seattle, but Ramani is still at large, according to the agency.
The Wahi case comes one month after DOJ officials arrested a New York man for engaging in the first-ever insider trading case for nonfungible tokens, or NFTs.
Federal prosecutors alleged that Nathaniel Chastain, 31, capitalized on his role as a product manager at OpenSea to buy NFTs before they were widely promoted on the site, later selling them for a profit when other investors bought the digital items. He resigned last September after the New York company discovered his activity, according to a company blog post in 2021.