Former Coinbase Global product manager Ishan Wahi pleaded not guilty to two counts of conspiracy to commit wire fraud and two counts of wire fraud in federal court in Manhattan on Wednesday, Reuters reported. Wahi is accused by US law enforcement and the Securities and Exchange Commission (SEC) of insider trading while working at Coinbase. He was arrested in May when he was trying to board a flight to India and was charged in July.
Specifically, Wahi is accused of passing confidential information to his brother Nikhil and his friend Sameer Ramani about the cryptocurrencies that Coinbase intended to list on its platform. This supposedly allowed them to obtain a profit of at least $1.5 million between June 2021 and April 2022, by purchasing the assets prior to their listing on Coinbase. It was possibly the first case of insider trading related to cryptocurrencies. Nikhil Wahi has also been arrested, but Ramani was still free at the end of July.
The SEC is pursuing a parallel civil case against Ishan Wahi based on its determination that nine of the 25 cryptocurrencies Wahi and his accomplice were speculating in – Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX and XYO- were securities. The SEC move was controversial, raising questions about the status of exchanges, funds, and investors who own these assets.
The Justice Department did not include securities fraud among the charges in the case and Coinbase adamantly denied that it handles securities in a blog post published after the charges against Wahi were filed, with Chief Legal Officer Paul Grewal writing:
“Instead of tailoring rules in an inclusive and transparent manner, the SEC relies on these kinds of one-off enforcement actions to try to include all digital assets, including non-securities, in its jurisdiction.”
Caroline Pham, of the Commodity Futures Trading Commission, also joined the topic and called the SEC case “a striking example of ‘regulation by force'”.
Apparently, the SEC also is studying insider trading on cryptocurrency exchanges in an investigation unrelated to this case.
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