The brother of a former Coinbase employee has agreed to pay the cryptocurrency exchange nearly $470,000 for its role in an insider trading scheme.
According to a New York District Court filing signed on April 6 and made public on April 10, Nikhil Wahi – the brother of former Coinbase product manager Ishan Wahi – will be required to begin making restitution payments while serving prison time in what is believed to be the first cryptocurrency-related insider use case.
The amount must be paid in full within 20 years of Nikhil’s release from prison and represents the amount Coinbase spent on legal services related to the DOJ investigation.
In September 2022, Nikhil pleaded guilty to starting operations based on confidential information obtained from his brother and is currently serving 10 months in prison on wire fraud conspiracy charges after being convicted on January 10.
2/ As a result of our investigation we identified 3 suspects and provided this information for law enforcement. One person was a Coinbase employee who we terminated. Today, the DOJ has criminally charged this former employee and the two other individuals for this abusive conduct.
—Brian Armstrong (@brian_armstrong) July 21, 2022
Due to his position at Coinbase, prosecutors alleged that Ishan knew when the exchange was going to list new cryptocurrencies and informed his brother Nikhil and an associate of his, Sameer Ramani, before the asset listings were publicly announced.
The prices of cryptocurrencies listed on the platform typically rose after it was posted, netting Nikhil a profit of $892,500, according to prosecutors. As part of his sentence, Nikhil had to turn over these funds to the United States government.
In a separate civil case, Coinbase defended the brothers and Ramani after the trio was sued by the Securities and Exchange Commission (SEC) for violating anti-fraud provisions of US securities law.
In an amicus curiae brief published on March 13, Coinbase condemned the defendants’ conduct, but supported a motion to dismiss the case, arguing that the SEC did not have jurisdiction to bring a lawsuit since the tokens in question did not pass the Howey test, a US legal doctrine that assesses whether an asset is a security.
Last week I testified to Congress about Coinbase’s futile effort to register with the SEC so we can begin to offer digital asset securities. Today we filed an amicus brief in SEC v. Wahi that explains why this misguided suit only makes things worse. 1/5https://t.co/9iWYrWwpiI
— paulgrewal.eth (@iampaulgrewal) March 14, 2023
The SEC said in an April 3 filing that it had reached “agreeable principle” with Ishan to resolve the SEC’s charges and was also in “good faith discussions” with Nikhil.
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