Three charged with insider trading of cryptocurrency assets

Federal authorities filed criminal and civil charges against a former Coinbase employee and two other men in an insider trading case involving sensitive information about cryptocurrency assets that was about to be published on the Coinbase exchange, according to charging documents. presented on Thursday.

The three men were involved in trades over a 10-month period using information on 14 listings on Coinbase that generated about $1.5 million in illegal profits, according to federal prosecutors in Manhattan. The men were criminally charged with three counts of wire fraud and conspiracy to commit wire fraud.

The case marked the first time authorities have filed criminal insider trading charges involving cryptocurrency assets, said Damian Williams, U.S. Attorney for the Southern District of New York.

Prosecutors, as well as the Securities and Exchange Commission in civil charging documents, said Ishan Wahi, who at the time was part of a Coinbase team listing assets on the exchange, passed on confidential information about when some of the assets would be listed. cryptocurrencies. his brother, Nikhil Wahi, and his brother’s friend, Sammer Ramani.

Nikhil Wahi and Mr. Ramani used that information to buy the assets before Coinbase announced they would be listed, officials said. After the announcement, the men sold the assets for a profit.

The alleged scheme came to light after Coinbase in April began an internal investigation in response to a Twitter post about unusual transactions.

IshanSr. Wahi had booked a flight to India just before the company interviewed him as part of the investigation. Authorities said he also tipped off his brother and his brother’s friend about the interview. Mr. Wahi and his brother were arrested Thursday morning in Seattle. Ramani remains at large, authorities said.

Lawyers for the Wahi brothers did not immediately respond to requests for comment. Ramani could not be immediately reached for comment. The SEC said that Mr. Ramani is a Houston resident but that he believed he was in India.

The charges suggest that federal authorities are poised to crack down on illicit trading in the world of digital assets in the same way they have prosecuted such crimes in the stock, bond and commodity markets.

“Our message with these charges is clear: Fraud is fraud is fraud, whether it happens on the blockchain or on Wall Street,” said Mr. Williams, the US attorney.

The SEC said that cryptocurrency assets listed on the Coinbase exchange are considered securities and therefore can be regulated like stocks or bonds, a stance that has been opposed by many in the digital currency world.

Last month, federal prosecutors brought an insider trading case related to the use of sensitive information to purchase other types of digital assets, non-fungible tokens, or NFTs. In that case, authorities charged a former employee of an NFT exchange with misappropriation of sensitive information about the timing of the public listing of digital tokens.

The two cases “are just the beginning of the Justice Department’s crackdown on insider trading in the crypto space,” said Ian McGinley, a former Justice Department prosecutor. “Both cases are for relatively small amounts, but the Justice Department brought them in to send a message: They are watching.”

In a post on the Coinbase website, the company’s CEO, Brian Armstrong, said that Coinbase had turned over information about the three men to the Department of Justice and had terminated Mr. Wahi’s employment. “We have zero tolerance for this type of misconduct and will not hesitate to take action against any employee when we find wrongdoing,” he wrote.

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