Crypto insider trading case leads to charges
A former Coinbase Global Inc. product manager was arrested and charged with allegedly leaking insider info. The suspect was stated to use insider information to help his brother and friend buy tokens before they were listed on Coinbase.
The suspect,Ishan Wahi, helped oversee listings for a unit in Coinbase that was focused on investment products. The arrest is part of a sweeping probe that prosecutors in the Southern District of New York and the SEC have been cooperating on. Wahi is also being sued by the SEC for violating anti-fraud rules set forth by the government agency.
It should be noted that the exchange operator (Coinbase) was not the main focus of the probe, therefore no charges have been pressed against the company.Coinbase was stated to have cooperated fully with the investigation.
U.S Attorny Damian Williams spoke on how the charges brought against Wahi showcased how web3 is not a law-free area, stating that “fraud is fraud, whether is occurs on the blockchain or Wall Street”
In the investigation it was discovered that Wahi tipped off his brother, Nikhil Wahi, and friend Sameer Rimini as to when tokens were going to be listed on Coinbase. The two co-conspirators used the information to make trades on dozones of tokens from the time of June 2021 April 2022 making a $1 million profit.
The indictment states Coinbase set up an interview with Wahi in part of an investigation, it was found that he had purchased a ticket to New Delhi and that it was One-Way, the flight was scheduled to leave in the next 11 hours.
Before the interview was to happen Wahi notified the director of security for Coinbase that he had to return hope abruptly but that the meeting could be made for another time. Wahi then proceeded to call his brother and friend and show the messages between him and the security director.
That May 16,before Wahi could even get on his flight, law enforcement was already there to intercept him. Wahi had multiple suitcases and belongings in tow despite stating that he would return for the interview the following week.It was obvious he was running from the situation at that point.
The complaint made by the SEC states that Wahi violated securities laws by providing non-public information to his brother and friend by text and phone calls via a foreign phone. There are policies inside of Coinbase that don’t allow for this type of behavior. The team of Coinbase noticed peculiar behavior when certain tokens were being purchased before put on the platform. Coinbase was quick to put Wahi on leave once they learned of potential insider trading. Wahi was fired on July 15.
The brother and friend of Wahi repeatedly made trades with the information given by Ishan Wahi which was in direct violation of his duty of care to Coinbase. The company is suing the brother and friend to pay civil penalties as well. Nine of the tokens that were traded by the two men were designated as securities by the SEC.
There are policies in effect at Coinbase that prevent employees from tipping off of others for trading profits.The company noticed there were reports of people buying assets before they had been listed. The Chief Executive Officer of Coinbase Brian Armstrong spoke on the situation and stated that the person would be found and reported to the authorities. The company was integral to the discovery of the men involved.
Though the company has not been charged this does mean that more scrutiny may come to the company. SEC chair Gary Gensler has long been a advocate for putting cryptocurrency under the jurisdiction of the agency.