Insider Trading In Cryptocurrency: Former Coinbase manager and two others charged in crypto tipping trading conspiracy
Two Indian brothers and their Indian-American friend have been charged in the United States with the first ever crypto insider trading conspiracy, in which they made illegal profits totaling more than $1.5 million.
Ishan Wahi, 32, and his brother Nikhil Wahi, 26, citizen of India who live in Seattle (Washington state), while Sameer Ramani, 33, lives in Houston (Texas) engaged in illegal trades in at least 25 different crypto assets, resulting in ill-gotten gains of more than a million dollars.
On Thursday, Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Director-in-Charge of the Federal Bureau of Investigation's New York Field Office, announced the uncovering of an accusation charging the Wahi brothers and Ramani with wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in crypto assets by using confidential Coinbase information about “which crypto assets to buy”.
The three individuals were also charged with insider trading by the Securities and Exchange Commission. The Wahi brothers were detained in Seattle early Thursday morning and will appear in the U.S. District Court for the Western District of Washington.
The Conspiracy:
Coinbase was among the world's major crypto exchanges throughout all relevant times. Coinbase customers can purchase, swap, and trade numerous digital assets using their Coinbase online access privileges. Coinbase added additional digital currencies to those that could be transacted on its exchange on a regular basis, and the market capitalization of digital assets often climbed rapidly when Coinbase disclosed that it will be ranking a specific cryptocurrency. As a result, Coinbase maintained such info extremely secret and prevented its personnel from disclosing it to anyone, including by offering a "TIP" to anybody who would trade based on it.
At least 14 times, beginning in June 2021 and continuing through April 2022, Ishan Wahi misappropriated Coinbase confidential data by informing either his brother, Nikhil Wahi, or Ishan Wahi's friend and associate, Sameer Ramani, about Coinbase's plans to list specific crypto assets and the timing of Coinbase's public announcements of those asset listings. This allowed them to make profits trading those crypto assets.
Shortly before Coinbase officially declared that it was launching or contemplating listing these crypto assets on its exchanges, Nikhil Wahi, Sameer Ramani, and Ishan Wahi purchased cryptocurrency after receiving tips from Ishan Wahi. The cryptocurrency assets were sold for a profit by Nikhil Wahi and Ramani after Coinbase's public listing announcements. Nikhil Wahi and Ramani together traded before at least 14 unique Coinbase public listing announcements involving at least 25 different crypto assets, based on secret information given by Ishan Wahi. As a result of the insider trading scheme, Nikhil Wahi and Ramani made gains totaling at least $1.5 million gains combined.
Nikhil Wahi and Ramani used accounts at centralized exchanges held in other people's names to conceal their purchases of cryptocurrencies ahead of Coinbase listing announcements. They also transferred funds, cryptocurrencies, and the proceeds of their scheme through a number of anonymous Ethereum blockchain wallets. Additionally, in order to further hide their involvement in the scam, Nikhil Wahi and Ramani often established and used new Ethereum blockchain wallets with no previous transaction history.
Words from Court Room:
Prosecutors claimed the three were accused in the first-ever cryptocurrency insider trading tipping conspiracy, in which the defendants engaged in illicit trades in at least 25 different crypto assets and made ill-gotten gains totaling $1.5 million.
"The accusations made today serve as a reminder that Web3 is not a law-free zone. Today I present the first-ever insider trading case using cryptocurrency markets after previously disclosing the first-ever insider trading case using NFTs. With these accusations, we are making it quite obvious that fraud is fraud, whether it takes place on the blockchain or on Wall Street. And the Southern District of New York will remain steadfast in bringing fraudsters to justice, wherever they may be found," Williams added.
The judgement call:
Ishan Wahi faces two charges of wire fraud conspiracy and two counts of wire fraud, each carrying a maximum sentence of 20 years in prison. Similarly, Nikhil Wahi and Sameer Ramani face one count of wire fraud conspiracy, each carrying a maximum sentence of 20 years in prison.
