The US Justice Department has charged three people with wire fraud conspiracy related to cryptocurrency insider trading.
On Thursday, federal prosecutors in New York City charged a former product manager at Coinbase Global and two co-conspirators with wire fraud concerning an insider trading scheme for cryptocurrency. This marks the first crypto insider trading case brought forth by officials at the U.S. Department of Justice, Southern District of New York attorney Damian Williams confirmed.
Former Coinbase manager Ishan Wahi has been accused of abusing his position and insider knowledge to invest in a cryptocurrency that were most likely guaranteed to increase in value, Bleeping Computer reported. The former Coinbase employee and his brother, Nikhil Wahi, were arrested in Seattle on Thursday, but their third co-conspirator, Sameer Ramani, remains at large and is believed to have escaped to India.
Crypto Insider Trading Lawsuit Defendants Face SEC Civil Charges
As part of the U.S.' first crypto insider trading case, Wahi and his co-conspirators are also facing a companion civil case from the Securities and Exchange Commission, in which the former Coinbase manager was accused of sharing confidential information about future asset listings with his brother and Ramani. According to Engadget, Wahi shared information from "at least" June 2021 to April 2022.
This information then helped Nikhil and Ramani to purchase assets before the listing increased in value before selling it for a profit. The two allegedly purchased 25 or more assets, resulting in a profit of over $1.1 million.
In April, Coinbase launched an investigation in response to a Twitter post about unusual trading activity. Coinbase is a 2012-founded cryptocurrency exchange platform with about 90 million registered users and a revenue of $7.84 billion in 2021.
Wahi attempted to flee to India right before Coinbase was set to interview him, but authorities in Seattle captured him and his brother. Wahi's lawyers insisted that the former Coinbase manager was innocent and promised that they would "vigorously" defend their client against the charges.
Coinbase reported that it turned over information to the U.S. Department of Justice for the crypto insider trading lawsuit and fired Wahi as a result of its "zero tolerance" policy for his behavior.
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U.S. Authorities Reiterate Commitment to Cracking Down on Fraud
Wahi's bail was set at $1 million during his initial appearance in Seattle federal court, Reuters reported. He was also ordered to surrender his passports but was not ordered to be detained despite his attempt to escape the U.S.
The former Coinbase manager is set to appear in a Manhattan court on Aug. 2. Manhattan U.S. Attorney Damian Williams reiterated in a statement that "Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street."
In compliance with the crypto insider trading lawsuit requirements, Coinbase chief security officer Philip Martin confirmed that the company shared the findings of its internal investigation into the trading with prosecutors. On Twitter, Martin reiterated their commitment to "ensure that all market participants have access to the same information."
Similarly, in June, Manhattan federal prosecutors charged a former product manager at OpenSea with insider trading, marking the first crypto insider trading case involving digital assets.
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