The US government is accusing three people, including a former Coinbase employee, of insider trading, in what is one of the first cases of insider trading involving cryptocurrency.
On Thursday, the Department of Justice announced the indictment of former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and their friend Sameer Ramani. The three were charged with wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in cryptocurrency assets. The three allegedly used confidential Coinbase information about when crypto assets would be listed on Coinbase to anticipate those listings and make profitable trades in advance of the announcements, according to the Department of Justice’s press release.
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“After getting tips from Ishan Wahi, Nikhil Wahi and Ramani used anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced that it was listing or considering listing these crypto assets on its exchanges,” the press release read. “Following Coinbase public listing announcements, Nikhil Wahi and Ramani sold the crypto assets for a profit.”
In the span of 11 months starting from June 2011 to April of this year, the three allegedly made a total of around $1.5 million in realized and unrealized gains by trading in advance of 14 Coinbase announcements regarding 25 different crypto assets, according to the feds.
“Ishan Wahi had detailed and advanced knowledge of which crypto assets Coinbase was planning to list and the timing of public announcements about those listings. Because the market value of crypto assets typically significantly increased after Coinbase announced that it would be listing a particular asset on its exchanges, Coinbase kept the information strictly confidential and prohibited its employees from sharing that information,” according to the indictment.
A Coinbase spokesperson did not comment, instead pointing to a thread posted on Twitter by Philip Martin, the chief security officer of Coinbase. Miller said the company “identified a Coinbase employee who we suspected improperly shared confidential information about Coinbase’s asset listings.”
“We also identified two non-Coinbase individuals this person appeared to be working with,” Martin wrote. “We provided information about them to the DOJ and terminated our employee. Today, these individuals have been criminally charged in the Southern District of New York.”
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In April of this year, independent blockchain investigators alleged that people connected to Coinbase may have committed insider trading after uncovering transaction records that showed an Etherum wallet loading up on tokens before they were listed. At the time, the company’s CEO Brian Armstrong responded saying “there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity. We have zero tolerance for this and monitor for it, conducting investigations where appropriate with outside law firms.”
In June, the Department of Justice accused an executive of NFT trading platform OpenSea of insider trading. The feds accused Nathan Chastain, at the time of the alleged crimes the head of product at OpenSea, of using confidential information to purchase NFTs from collections that were about to be featured on the site’s home page in a similar scheme to the one allegedly conducted by the two Wahi brothers and Ramani.
UPDATE, July 21, 12:18 p.m. ET: This story was updated to include the response from Coinbase.
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