First cryptocurrency insider trading case launched in the US

What’s new? On July 21, a New York court filed insider trading charges against a former Coinbase cryptocurrency exchange manager Ishan Wahi, as well as his brother Nikhil Wahi and their mutual friend Sameer Ramani. According to the case file, all three used the exchange’s internal information about which cryptocurrencies would be listed on the platform in the near future to buy them in advance of a price hike after listing. Through this scheme, the scammers earned a total of $1,5 million from the listings of 25 cryptocurrencies.

Information on the US Department of Justice’s website

Details of the case. Ishan Wahi worked as Coinbase’s product manager since October 2020, in this position he was involved in the listing process and had information about the exact dates of announcements and subsequent listings of new coins on the platform. He shared this data with his brother and friend from at least June 2021 to April 2022.

To conceal the purchase on the eve of the listing, the accomplices used accounts on centralized exchanges belonging to others, and the funds from the subsequent sale were funneled through several anonymous wallets. New wallets were created for each such transaction, with no transaction history, they helped conceal the fraudulent scheme.

In April 2022, information spread on Twitter that an unknown wallet bought tokens worth “hundreds of thousands of dollars” a day before the announcement of their listing on Coinbase. Representatives of the exchange said that they launched an internal investigation and later said that employees who used confidential information would be fired and turned over to law enforcement. It later emerged that Ishan Wahi and his associates were behind the transaction.

On May 16, Coinbase management had scheduled a face-to-face meeting in Seattle, but he had bought a ticket to India the night before. While trying to board the plane, the accused was detained by airport security. On July 21, both brothers were formally arrested, Ramani is still at large.

All three were charged with wire fraud conspiracy and its execution, the articles carry a maximum sentence of 20 years imprisonment.

According to Manhattan US Attorney Damian Williams, this is the first such criminal case in US history. Earlier, the first criminal case of insider trading of NFTs was filed. Under it, a former product manager of the OpenSea NFT marketplace Nathaniel Chastain also faces up to 20 years in prison. Williams added:

“Today’s charges are a further reminder that Web 3.0 is not a law-free zone.”