Former Coinbase employee charged with crypto insider trading

A former Coinbase employee illegally told his brother and friend about new cryptocurrencies that would soon 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 the help of Ishan Wahi, Ramani and Nikhil Wahi bought at least 25 crypto assets before Coinbase announced their arrival and then sold the assets for a profit of $1.1 million, the SEC said. The trio also face wire fraud charges by the US 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 the sharing of confidential information about publicly traded stocks and other traditional securities.

“We are not concerned with labels, but with the economic realities of an offering,” Gurbir Grewal, the SEC’s chief enforcement officer, said in a statement. “In this case, these facts assert that some of the crypto assets at issue were securities and, as alleged, the defendants engaged in typical insider trading prior to their listing on Coinbase.”

Federal regulators said Ishan Wahi worked as Coinbase’s product manager on the asset listing team, which meant he knew which crypto assets were soon to be offered. Between August 2021 and May 2022, Ishan Wahi was part of a private messaging group at Coinbase where employees shared exact release dates for new crypto assets, authorities said. He allegedly shared the company’s information with his brother or friend at least 14 times between June 2021 and April 2022, according to government officials.

Coinbase suspicions

Coinbase officials said they suspected Ishan Wahi was engaging in illegal activities and began investigating him in April, Coinbase head of security Philip Martin said in a series of tweets published on Thursday.

“Once we gathered enough evidence to support our suspicions, we provided information about these individuals to the DOJ and terminated our employee,” Coinbase CEO Brian Armstrong said in a blog post.

Justice Department officials said Ishan Wahi tried to flee the US and fly to India a month after Coinbase began its investigation. Law enforcement officials prevented him from boarding his outbound flight to New Delhi on May 16, prosecutors said. Both Wahi brothers were arrested Thursday in Seattle, but Ramani remains at large, the agency said.

The Wahi case comes a month after DOJ officials arrested a New York man participate in the first case of privileged information for non-fungible tokens or NFTs.

Federal prosecutors alleged that Nathaniel Chastain, 31, used his role as a product manager at OpenSea to buy NFTs before they were widely promoted on the site, then sold them at a profit when other investors bought digital articles. He resigned last September after the New York company discovered his activity, according to a 2021 company blog post.

In:
• cryptocurrency