As was reported earlier today, the Securities and Exchange Commission (SEC) has filed charges in regards to a former Coinbase manager and allegations of insider trading that involved two other perpetrators. The SEC noted that criminal charges have been simultaneously filed in the Southern District of New York. This is the first-ever criminal case alleging insider trading on a crypto marketplace.
According to the US Department of Justice, an indictment was unsealed today, charging Ishan Wahi, the former Coinbase manager, his brother Nikhil Wahi and friend Sameer Ramani with wire fraud conspiracy, and wire fraud regarding a ploy to commit insider trading leveraging confidential information gleaned from the Coinbase platform. Ishan Wahi, as a member of the Coinbase asset listing team, was required to report his digital asset holdings and subject to an “enhanced trading policy” thought sought clearance for any trade.
The Wahi brothers were both arrested in Seattle, Washington this morning and presented in the United States District Court for the Western District of Washington. The DOJ states that Ishan Wahi, attempted to flee the country.
As mentioned by the SEC, Sameer Ramani, also charged, remains at large.
Damian Williams, the US Attorney for the Southern District of New York, issued the following statement:
“Today’s charges are a further reminder that Web3 is not a law-free zone. 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. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them.”
Michael J. Driscoll, FBI Assistant Director, added:
“Although the allegations, in this case, relate to transactions made in a crypto exchange – rather than a more traditional financial market – they still constitute insider trading. As alleged, the defendants made illegal trades in at least 25 different crypto assets and realized ill-gotten gains totaling approximately $1.5 million. Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets – both ‘old’ and ‘new.’”
The DOJ alleges that based on confidential information the trio collectively traded shortly in advance of at least 14 separate Coinbase public listing announcements concerning at least 25 different crypto assets. As a result of the insider trading plan, Nikhal Wahi and Ramani collectively generated realized and unrealized gains totaling at least approximately $1.5 million.
The DOJ points to an example of the operation. On April 11, 2022, Coinbase revealed it was considering listing “dozens” of cryptocurrencies on the exchange. Prior to the announcement, multiple anonymous crypto wallets purchased “large quantities” of at least six cryptocurrencies.
Reportedly, after Ramani traded in advance of Coinbase’s April 11 listing announcement, and on April 12, 2022, a Twitter account that is “well known in the crypto community” tweeted regarding an Ethereum blockchain wallet “that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published.” Allegedly, the trading activity referenced in the April 12 tweet was the trading caused by Ramani.
Coinbase noticed the Tweet and publicly replied that it had begun investigating the matter. Coinbase followed up the first tweet stating that any Coinbase employee that leaded confidential information would be terminated and public authorities would be contacted.
On May 11, 2022, Coinbase’s Director of Security emailed Ishan Wahi and told him he must attend a meeting in person in Coinbase’s Seattle office on May 16, 2022. On May 15, Wahi purchased a ticket for a one-way flight to India. Prior to boarding the flight, Wahi was prevented from leaving the country by law enforcement officers.
Ishan Wahi, 32, of Seattle, Washington, is charged with two counts of wire fraud conspiracy and two counts of wire fraud, each of which carries a maximum sentence of 20 years.
Nikhil Wahi, 26, of Seattle, Washington, is charged with one count of wire fraud conspiracy and one count of wire fraud, each of which carries a maximum sentence of 20 years.
Sameer Ramani, 33, of Houston, Texas, is charged with one count of wire fraud conspiracy and one count of wire fraud, each of which carries a maximum sentence of 20 years.