WASHINGTON (BLOOMBERG) – Federal prosecutors in Manhattan have brought their first ever case for insider trading in digital coins, charging a former Coinbase Global product manager with leaking information to help his brother and a friend buy tokens just before they were listed on the exchange.
The arrest on Thursday (July 21) of Ishan Wahi, who helped oversee listings for a Coinbase unit focused on investment products, follows a sweeping probe involving the Securities and Exchange Commission (SEC). The SEC also alleged that Wahi violated the agency’s anti-fraud rules.
“Today’s charges are a further reminder that Web3 is not a law-free zone,” Manhattan US Attorney Damian Williams said in a statement. “Our message with these charges is clear: Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.”
He added that Coinbase had cooperated with the probe.
Coinbase lets Americans trade more than 150 tokens, including many that have been added in recent months. Due to the platform’s status as the largest crypto exchange in the United States, coins can often see a rush of interest – and a surge in price – immediately after being included.
Wahi tipped off his brother, Nikhil Wahi, and friend Sameer Ramani when tokens were about to be listed by the exchange, according to the charges. Nikhil Wahi and Ramani allegedly used that information to trade dozens of tokens from at least June 2021 until April 2022 for a profit of more than US$1 million (S$1.4 million), the government said.
Prosecutors charged the three men with wire fraud conspiracy and wire fraud, and the SEC accused them of insider trading.
Mr Andrew St Laurent, an attorney for Ishan Wahi, 32, declined to comment. Ramani, 33, remains at large, according to the US Attorney’s office.
Priya Chaudhry, a lawyer for Nikhil Wahi, 26, who was also arrested, said in a statement that her client did not do anything wrong.
“These prosecutors are trying to criminalise innocent behaviour because they are looking for a scapegoat because so many people have lost money in cryptocurrency recently,” Ms Chaudhry said. “The government is embarrassed and arresting Nikhil Wahi is a knee-jerk reaction to save face.”
Coinbase chief legal officer Paul Grewal said: “Any illicit behaviour is something we take super seriously. We have zero tolerance for it.”
He said Coinbase immediately conducted an investigation after learning of a potential insider trading issue and put Ishan Wahi on unpaid administrative leave. Wahi was officially fired on July 15, Mr Grewal said.
Manhattan prosecutors launched their investigation in April, after complaints surfaced on social media about unusually well-timed investments in tokens that were listed on Coinbase. The probe gained steam in mid-May, when the authorities prevented Wahi from leaving the country.
While Coinbase was not charged, the cases could lead to additional scrutiny for the platform. In a press release, the US Attorney credited the company for cooperation in the investigation.
SEC chair Gary Gensler has long argued that many cryptocurrencies fall under the regulator’s jurisdiction. He has also said that digital asset exchanges should register with the agency because they offer trading in those products. Coinbase and other crypto platforms have not done so thus far.