On July 21, the U.S. Department of Justice filed an indictment against Ishan Wahi, a former Coinbase manager, and two other individuals for obtaining approximately $1.5 million through cryptocurrency insider trading on the Coinbase exchange.
According to the Department of Justice, this is the first case of insider trading in the crypto industry. The defendants used their privileged knowledge while working at Coinbase to sell information to others and invest in cryptocurrencies scheduled for listing on the exchange.
Ishan Wahi and his brother Nikhil Wahi were arrested this morning in Seattle, Washington. Wahi’s partner and friend Sameer Ramani is still free but wanted.
Ishan Wahi Used His Coinbase Position To Commit Fraud
Wahi had access to exclusive messaging groups for high-ranking Coinbase employees. Because of this, he received privileged information about the exact date on which some cryptocurrencies would be listed on the platform, being able to invest large amounts of money before other people.
A Twitter post was critical to this investigation. The account reported that someone purchased “hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published.” Coinbase replied and assured that it was already conducting the appropriate investigations, adding that whoever engaged in these fraudulent activities would be immediately fired and referred for prosecution.
After a month of investigations, Coinbase tracked down Wahi and scheduled him for a meeting on May 16, but the evening before the meeting, Wahi purchased a one-way flight to India. He couldn’t get away because he was arrested at the airport. Before his arrest, Wahi sent several messages to his brother and business partner, alerting them of the investigation.
All three defendants face conspiracy charges and wire fraud, each carrying a maximum sentence of 20 years. However, the maximum penalty can only be determined by the judge.
Crypto Crime Doesn’t Pay
For Damian Williams, U.S. Attorney, these charges will serve as a reminder of U.S. authorities’ effectiveness in fighting crime, even breaking the myth that the Web3 is untouchable and outside the law.
“Today’s charges are a further reminder that Web3 is not a law-free zone. Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud, whether it occurs on the blockchain or on Wall Street.”
Michael J. Driscoll, FBI Assistant Director, said that even though the fraud committed was on a cryptocurrency exchange and not in a traditional market, today’s action demonstrates “the FBI’s commitment to protecting the integrity of all financial markets.”