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Financial Crime: ‘Fraud is fraud’: Former Coinbase manager charged in first-ever cryptocurrency insider-trading case

A former Coinbase product manager has been charged in the first-ever cryptocurrency insider-trading case, for allegedly tipping his brother and a friend to upcoming asset listings that weren’t yet publicly known.

Ishan Wahi, 32, of Seattle, worked as a product manager for Coinbase Global
the largest crypto exchange in the U.S., and was one of a small group of employees who received advance knowledge of assets that were soon to be listed on the exchange.

Federal prosecutors said that between August 2021 and May 2022, Wahi told his brother, Nikhil Wahi, 26, of Seattle, and their friend, Sameer Ramani, 33, of Houston, Texas, of the upcoming listings and that they used that information to place favorable trades ahead of time.

Prosecutors said that over the course of 14 separate trades Nikhil Wahi and Ramani illegally netted $1.5 million in illicit profits. All three men are charged with wire fraud and wire fraud conspiracy, and face up to 20 years in prison if convicted. The Securities and Exchange Commission has also filed a civil suit against the men.

The Wahi brothers were arrested in Seattle on Thursday, prosecutors said, but Ramani remains at large. It wasn’t immediately clear if the men had retained attorneys and they could not immediately be reached.

“Today’s charges are a further reminder that Web3 is not a law-free zone,” said Damian Williams, the U.S. attorney in Manhattan. “Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.”

Williams said the charges marked the first insider trading case ever brought involving crypto currencies. In June, his office had brought the first insider trading case involving non-fungible tokens, or NFTs.

According to authorities, Coinbase became aware of the possibility of a leak in April when a Twitter account popular in the crypto community flagged a series of anonymous Ethereum trades that exactly matched an asset listing on the exchange that came 24 hours later.

At the time, Coinbase said it had begun an investigation into the matter and anyone caught providing insider information would be “immediately terminated and referred to relevant authorities (potentially for criminal prosecution).” 

In a statement, Coinbase said it had turned over the details of its internal investigation to federal authorities after determining who was involved.

“Coinbase takes allegations of improper use of company information very seriously,” the company said. “We have zero tolerance for this kind of misconduct and will not hesitate to take action against any employee when we find wrongdoing.”

Prosecutors said that Coinbase’s head of security called Ishan Wahi in for a meeting in May. Shortly after receiving that message, Wahi allegedly purchased a one-way ticket to India. He then told the company he had already left the country, even though he hadn’t, and then informed his brother and Remani of the company’s probe. He ultimately attempted to leave the country, but was stopped by authorities before boarding his flight, prosecutors said.

Hear from Mike Novogratz at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The Galaxy Digital CEO has ideas about navigating the crypto winter. 

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