According to US federal authorities, a former product manager at Coinbase Global, along with two other individuals, ran an insider trading scheme for about a year. These people managed to generate profits of about $1.1 million from this scheme.
The scheme
An employee of the Coinbase exchange in San Francisco, Ishan Wahi had allegedly shared information regarding upcoming listings of tokens on the platform with Nikhil Wahi, his brother, and Sameer Ramani, his friend.
According to the authorities, his friend and brother had then used this information for buying the tokens before Coinbase listed them on its platform and then they sold the said tokens quickly in order to make profits.
Coinbase is known as the biggest crypto exchange based in the United States and its tokens and coins have a tendency to rise in value once they are listed. It is often referred to as the ‘Coinbase effect’. Wahi’s brother and Ramani used the insider knowledge they were given for buying cryptocurrencies before they got listed on the Coinbase exchange and once they rose after getting listed, they would sell them for profits.
The charges
The US Department of Justice announced that charges of ‘wire fraud conspiracy’, along with wire fraud in an insider trading scheme involving crypto assets, had been brought against the three individuals involved.
Moreover, the Securities and Exchange Commission (SEC) also filed civil charges against the three individuals because of their alleged scheme. The press release from the DOJ said that the Wahi brothers had been arrested, but Ramani could not be found.
Damian Williams, the US Attorney, said that the charges filed against the trio are a reminder that the Web3 ecosystem should not be considered law-free. He said that they had announced the first-ever case of insider trading that used NFTs in the previous month and now they were announcing the first ever case of insider trading in the crypto space.
In the case of the former, the US Attorney was making a reference to the charges that had been filed against Nate Chastain, the former product manager at OpenSea.
The SEC
Acting chief of the crypto assets and cyber unit of the SEC, Carolyn M. Welshhans said that they would continue their goal of identifying and eliminating insider trading schemes involving securities, regardless of whether it is equities, crypto assets, options, or others.
The SEC further disclosed that the three defendants had managed to make purchases of about 25 cryptocurrencies and nine of them had been securities. However, it should be noted that they did not clarify the assets that were purchased by the trio.
Coinbase had announced back in April that it would no longer provide a shortlist of assets that it was considering listing. This was after $400,000 worth of tokens had been purchased by an Ethereum trader when the list had been made public. It had resulted in a whopping 42% increase in the price of the token in a matter of 24 hours.
