Prior to at least 14 different Coinbase public listing announcements, three people are accused of using several Ethereum wallets to buy certain coins.
Three individuals, including a former product manager at Coinbase Global, have been charged by US authorities with wire fraud conspiracy and wire fraud in connection with a scheme to engage in insider trading using cryptocurrencies.
Ishan Wahi, his brother Nikhil Wahi, and colleague Sameer Ramani have all been charged in an indictment filed by the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation’s New York Field Office, according to a statement released on Thursday. The group allegedly made about $1.5 million in profits by trading 25 different cryptocurrencies using secret information Ishan got from Coinbase about which tokens will be published on the exchange.
Three charged in first ever cryptocurrency insider trading tipping scheme https://t.co/cdTcwQQOau
— US Attorney SDNY (@SDNYnews) July 21, 2022
The authorities claim that between August 2021 and May 2022, which included the launch dates of tokens, Ishan’s role as a product manager gave him access to certain information on listing cryptocurrencies on exchanges under Coinbase’s control. The U.S. Attorney’s Office said that between June 2021 and April 2022, Ishan sent Ramani or his brother information about the coins’ debut date so they could buy them before their prices rose as a result of Coinbase placing them on their exchange.
The trio allegedly used several Ethereum blockchain wallets to make and move the purchases, as well as accounts at centralized exchanges in other people’s names, in at least 14 different Coinbase public listing announcements. On Thursday, authorities detained Ishan and Nikhil in Seattle, while Ramani is still at large.
The allegations in this investigation involve transactions that took place on a cryptocurrency exchange as opposed to a more conventional financial market, but insider trading nonetheless, according to FBI assistant director Michael Driscoll.
In a separate announcement, the U.S. Securities and Exchange Commission accused the two Wahis and Ramani of engaging in insider trading over 25 different assets, alleging that at least nine of those assets generated gains of $1.1 million for the trio. The three people are accused of breaking the securities laws’ antifraud provisions, according to the regulatory body’s complaint. The SEC stated that it sought civil penalties, disgorgement, and permanent injunctive relief.
Gurbir Grewal, director of SEC enforcement, stated that the organization’s interest was with an offering’s economic realities rather than its labels. “In this case, such realities affirm that some of the in question crypto assets were securities and, as alleged, the defendants participated in conventional insider trading before their listing on Coinbase,” the court’s ruling reads.
When online sleuths found that numerous Ethereum wallets had bought huge amounts of six tokens in April, suspicions of insider trading arose prior to a significant listing announcement by Coinbase, and many members of the cryptocurrency community learned of some of the alleged happenings in the case. At the time, CEO Brian Armstrong stated that the chance existed that “someone inside Coinbase could, wittingly or unknowingly, disclose information to outsiders engaging in illicit activities,” and that the exchange would, if necessary, conduct investigations and work with outside law firms:
“If these investigations find that any Coinbase employee somehow aided or abetted any nefarious activity, those employees are immediately terminated and referred to relevant authorities (potentially for criminal prosecution).”
The director of security operations at Coinbase called Ishan on May 11 to set up a meeting on the exchange’s asset listings, according to the U.S. Attorney’s Office. Prior to the intended meeting on May 16, Ishan attempted to take a one-way trip to India but was prevented by law enforcement.
Ishan’s Twitter account was marked as protected at the time of publication, and his LinkedIn page was hidden from view. The former product manager for Coinbase spoke about plans for the exchange to “give more openness and information for newly traded assets” in a blog post published in March, particularly referencing increasing its services.