Authorities in the United States have charged three individuals with wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading using cryptocurrencies, one of whom was a former product manager at Coinbase Global.
In an announcement on Thursday, The United States Attorney’s Office for the Southern District of New York, along with the New York Field Office of the Federal Bureau of Investigation, said it had filed an indictment against former Coinbase Global product manager Ishan Wahi, as well as his brother Nikhil Wahi and his associate Sameer Ramani. The trio allegedly used sensitive information that Ishan obtained from Coinbase regarding the tokens to be traded on the exchange to make approximately $1.5 million in profits by trading 25 different cryptocurrencies.
Three charged in first ever cryptocurrency insider trading tipping scheme https://t.co/cdTcwQQOau
— US Attorney SDNY (@SDNYnews) July 21, 2022
Three Charged in First Cryptocurrency Insider Trading Scheme
According to authorities, Ishan was aware of certain information regarding the listing of cryptocurrencies on exchanges controlled by Coinbase in his position as product manager from August 2021 to May 2022, a period that spanned the launch dates of the tokens. The United States Attorney’s Office alleged that from June 2021 to April 2022, Ishan passed information related to the token release date to his brother or Ramani to invest in the cryptocurrencies before an anticipated jump in price occurred due to a major exchange like Coinbase listing the asset.. The indictment specifically mentions $7,000 in trading profits from Tribe (TRIBE), $13,000 from Alchemix (ALCX), Gala (GALA), Ethereum Name Service (ENS), and Powerledger (POWR), and $900,000 from XYO.
The trio allegedly used the insider trading scheme in at least 14 separate Coinbase public listing announcements, using multiple Ethereum blockchain wallets to make and transfer purchases, and centralized exchange accounts on behalf of others. Authorities arrested Ishan and Nikhil in Seattle on Thursday, while Ramani remains at large.
“Although the allegations in this case relate to transactions made on a cryptocurrency exchange—rather than a more traditional financial market—they still constitute insider trading.”said FBI Deputy Director Michael Driscoll.
The US Securities and Exchange Commission also announced its own parallel charges against the two Wahis and Ramani, alleging that At least 9 of the 25 assets the trio allegedly insider traded were stocks that had brought them $1.1 million in profit: POWR, Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally ( RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX and XYO. The regulatory body filed a complaint alleging that the three individuals violated the anti-fraud provisions of the securities laws. The SEC said it was seeking permanent injunctions, reimbursement and civil penalties.
“We’re not concerned with labels, but with the economic realities of a bid,” said SEC Enforcement Director Gurbir Grewal. “In this case, those facts assert that several of the crypto assets at issue were securities, and the defendants allegedly engaged in typical insider trading prior to their listing on Coinbase.”
Many in the cryptocurrency community became aware of some of the alleged incidents in the case in April, when online sleuths discovered that multiple Ethereum wallets had purchased large amounts of six tokens, prompting insider trading claims earlier. of a major Coinbase listing announcement. CEO Brian Armstrong then said that “there is always the possibility that someone inside Coinbase could knowingly or unknowingly leak information to people outside the company who are engaged in illegal activities” and that the exchange would conduct investigations and coordinate with outside law firms if were necessary:
“If these investigations find that any Coinbase employee in any way aided or abetted any nefarious activity, those employees are immediately terminated and referred to the relevant authorities (potentially for criminal prosecution).”
The US Attorney’s Office reported that Coinbase’s director of security operations contacted Ishan on May 11 to set up a meeting related to the exchange’s asset listings. Ishan attempted to board a one-way flight to India before the meeting scheduled for May 16, but was stopped by law enforcement.
At the time of publication, Ishan’s LinkedIn profile was not visible to the public, and his Twitter account was listed as protected. In a March blog post for Coinbase, the former product manager wrote about efforts for the exchange to provide “more transparency and information for new tradable assets,” specifically mentioning expanding its offerings.
Cointelegraph reached out to Coinbase but did not receive a response as of press time.
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