Former Coinbase executive arrested, insider trading case

Federal prosecutors in Manhattan have filed the first cryptocurrency insider trading lawsuit, accusing a former product manager at Coinbase Global Inc. of leaking information to help his brother and a friend buy tokens shortly before they were listed on the exchange, The brother allegedly traded the tokens at a profit after they were posted on the platform Thursday’s arrest of Ishan Wahi, who helped oversee the listings of an investment-focused unit of Coinbase, follows a broad investigation involving the Southern District of New York and the Securities and Exchange Commission. The SEC also alleged that Wahi violated the agency’s rules against fraud.

Coinbase allows trading in more than 150 tokens, including many added in recent months. Because the platform is the largest cryptocurrency exchange in the United States, when Coinbase lists a new token, there is sometimes a price spike. That’s what happened when it added XRP in 2018. XRP rose to $0.91 the same day it was listed, an increase of about 43 percent

So Ishan Wah passed tips to his brother, Nikhil Wahi, and friend Sameer Ramani about the impending listing of a new token by a cryptocurrency exchange, Ishan Wahi allegedly traded dozens of tokens from at least June 2021 to April 2022 for a profit of more than $1 million, according to charges filed Thursday in New York.

insider trading

Andrew St. Laurent, attorney for Ishan Wahi, 32, declined to comment on the charges filed Thursday in New York against his client and two other men accused of insider trading. It is unclear whether Ramani, 33, is still at large.

Priya Chaudhry, a lawyer for Nikhil Wahi, 26, who was also arrested, said in a statement that her client had done nothing wrong

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“These prosecutors are trying to criminalize innocent behavior because they are looking for a scapegoat, as many people have recently lost money with cryptocurrencies,” and that “The government is embarrassed and Nikhil Wahi’s arrest is a knee-jerk reaction to save face.”

Paul Grewal “legal officer of coinbase”

“Any illegal behavior is something we take very seriously. We have zero tolerance,” said Paul Grewal, Coinbase’s chief legal officer. He said Coinbase immediately conducted an investigation after learning of a potential insider trading issue and placed Wahi on unpaid administrative leave. Grewal said Wahi was officially fired on July 15.

When did the suspicions begin?

Manhattan prosecutors launched the investigation in April after complaints surfaced on social media about unusually timely investments in tokens listed on Coinbase. The investigation intensified in mid-May, when authorities prevented Wahi from leaving the country.

According to prosecutors, Coinbase arranged an interview with Wahi in Seattle for May 16 as part of its internal investigation into suspicious trading activity. The night before the interview, Wahi purchased a one-way ticket for a scheduled flight in 11 hours. The next day, about 35 minutes before the meeting was scheduled to begin, Wahi emailed Coinbase’s director of security operations to say that he “needed to go home” and reschedule the meeting.

Law enforcement officers showed up at the airport before Wahi could board his flight. Despite his apparent desire to postpone the meeting to another day of the week or the next, he brought with him a wide range of personal belongings, including three large suitcases, seven electronic devices, two passports, and various forms of identification. He also had several hundred dollars in U.S. currency.

Federal prosecutors decided not to ask the judge to hold Ishan Wahi before trial after his family obtained a $1 million bail through Wahi’s Robinhood account, according to court documents.

The SEC “The Securities and Exchange Commission” is the U.S. federal agency overseeing the stock exchange has sued three men for insider trading in cryptocurrency, alleging that one of them used a foreign phone to communicate material non-public information about a planned acquisition by Coinbase Inc.

The agency said the case against the Wahi brothers and Ramani is the first for cryptocurrency insider trading.

SEC Chairman Gary Gensler has long maintained that many cryptocurrencies fall under the regulator’s jurisdiction. He has also said that digital asset exchanges should register with the agency because they offer trading in such products. Coinbase and other cryptocurrency platforms have not done so so far.

Brian Armstrong

In April, Coinbase CEO Brian Armstrong said in a blog post that the company had “received reports of people appearing to buy certain assets right before we announced the listing.”

Without giving specific examples, Armstrong added that there is a possibility that someone within the company could leak information to outsiders and that the company will hunt for misconduct and, if found, will refer to authorities for possible criminal action.

Although Coinbase has not been charged, the cases could lead to further scrutiny of the platform. In a press release, the U.S. Attorney’s Office acknowledged the company’s cooperation in the investigation.


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