The Department of Justice (DOJ) has charged a former product manager at Coinbase Global and two others with wire fraud conspiracy, in what probaby is the first case of insider trading involving crypto assets.
Ishan Wahi, the former Coinbase employee and his two accomplices, Nikhil Wahi and Sameer Ramani allegedly ‘made illegal trades in at least 25 different crypto assets’ and made about $1.5 million, according to the DOJ’s indictment.
The indictment states that Ishan Wahi revealed information about Coinbase listings to Nikhil Wahi, his brother, and Ramani ahead of their launch on at least 14 occasions.
The three, allegedly, used this information to buy the crypto assets before the listing and sell them for a profit afterwards, using anonymous Ethereum wallets.
U.S. Attorney Damian Williams said, “Today’s charges are a further reminder that Web3 is not a law-free zone…Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.”
Moreover, the three defendants are also charged by the SEC for alleged violation of antifraud provisions of securities laws and insider trading which ‘generated illicit profits totaling more than $1.1 million.’
“…the defendants engaged in typical insider trading ahead of their listing on Coinbase. Rest assured, we’ll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The U.S. Attorney’s Office for the Southern District of New York also announced criminal charges against all three individuals.
Coinbase itself released a blog post and a Twitter thread detailing the events of the current situation. The platform said that it has “zero tolerance for this kind of misconduct and will not hesitate to take action against any employee when we find wrongdoing.”
The platform states that after being alerted of allegations of insider trading inside the company, Coinbase immediately launched an internal investigation into the matter.
The Director of security at Coinbase decided to meet with Wahi and discuss matters, after finding out the results of the investigation.
Wahi, on the day of the meeting, set out to board a one-way flight to India, after alerting his co-conspirators of the investigation. He was, however, stopped by law enforcement right before he boarded his flight.
Coinbase calls the charges by the SEC ‘an unfortunate distraction from today’s appropriate law enforcement action.’
The platform also listed certain changes they intend to make in the upcoming months to avoid such incidents.