Authorities are investigating three people, including an employee of cryptocurrency broker Coinbase, for allegedly enriching themselves through insider trading on information to which the person involved had access while working at the crypto exchange.
Ishan Wahi, a product manager at Coinbase, his brother, Nikhil Wahi, and a friend, Sameer Ramani, have been charged by the U.S. Attorney’s Office for the Southern District of New York for illicit enrichment. Apparently, Isham Wahi would be the key player who supplied inside information to the other two individuals about tokens that were about to be listed on the crypto exchange.
The filing of charges by prosecutors against one of Coinbase’s employees comes as a bucket of cold water for the exchange, since in the same week the Securities and Exchange Commission (SEC), has begun a process against the company for including 9 cryptocurrencies on its platform that are not registered with the regulatory body.
Coinbase confirmed through a statement that the three men are under investigation. It also announced the dismissal of Ishan Wahi, but clarified that it has provided all the information requested by the Department of Justice.
Ishan Wahi, who worked as part of the team that listed assets on the platform, had inside knowledge about when assets were going to be listed on the platform and when they would be announced, prosecutors in the case explained.
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Beginning in June 2021, the three defendants used confidential information to make trades prior to their announcement in at least 14 cryptocurrencies listed on Coinbase. The men hid their trades through a network of fictitious accounts at the broker and the use of an anonymous digital wallet, prosecutors claimed.
Authorities estimate that under this scheme the Wahi brothers and Ramani made profits of approximately $1.5 million.
The purchases attracted the attention of several members of the crypto community. In April, numerous Twitter accounts known to be active in the cryptocurrency world announced the purchase of hundreds of thousands of tokens of various cryptocurrencies 24 hours before they were publicly announced on Coinbase.
To conceal their cryptoasset purchases prior to listing announcements on Coinbase, those involved used accounts on centralized exchanges in the names of others and transferred funds, cryptoassets, and proceeds from their scheme through multiple anonymous wallets on the Ethereum blockchain.
Nikhil Wahi and Ramani also regularly created and used new wallets on the Ethereum blockchain without any prior transaction history to further conceal their involvement in the inside trading scheme.
On May 11, Coinbase’s security team called Ishan Wahi to a meeting to discuss the issue. After the meeting, prosecutors allege that Wahi purchased a ticket to India for the following day. Before taking the flight, Wahi sent a text message informing him of the Coinbase security team’s investigation. The Coinbase employee was detained at the airport by authorities and is awaiting trial today.
If the prosecutor’s office’s accusations are proven, this would be the first inside trading case in the history of the cryptocurrency world to be solved by the authorities. The Wahi and Ramani brothers could be sentenced to up to 20 years in prison if convicted.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica