Two Coinbase Global product managers and a former product manager were charged with wire fraud in the first case of insider trading involving cryptocurrency. The charges were announced by U.S. prosecutors at Manhattan on Thursday.
On Thursday, Ishan Wahi (the product manager at the cryptocurrency exchange) and Nikhil Wahi (his brother) were arrested in Seattle.
A third defendant, Sameer Ramani, is also facing civil charges by the U.S. Securities and Exchange Commission. Ramani remains at large.
Lawyers for Ishan Wahi (32), stated that he was innocent of any wrongdoing and will vigorously defend himself. Nikhil Wahi’s lawyer did not respond immediately to inquiries for comment. Reuters was unable to identify Ramani’s lawyer immediately.
Prosecutors claimed that Ishan Wahi had shared confidential information regarding future announcements about new cryptocurrency assets that Coinbase would allow users trade on its exchange.
The team also claimed that Ishan Wahi purchased a one-way ticket to India from Coinbase after a security director called him to the Seattle office of the company for a meeting. Prosecutors said that he was barred from board the May 16 flight by law enforcement.
Ishan Wahi was initially brought before the Seattle federal court. Bail was set at $1million and he was required to surrender his passports. Despite his alleged attempts to flee, he was not required to be held by the authorities. His next appearance before a federal court is scheduled for Aug. 2, in Manhattan.
The SEC also charged Ramani, 33, and Nikhil Wahi (26), with the charges of purchasing and selling at least 25 crypto assets. Nine of these were allegedly securities.
A Coinbase representative was not able to comment on whether the SEC would take legal action against Coinbase because it listed the tokens that were deemed securities in the SEC complaint.
Wahi and Ramani were alleged to have used ethereum blockchain wallets in order to acquire the assets. They traded at least 14 time before Coinbase announced their announcements starting June 2021 or April 2022. This generated at least $1.5million of illicit gains, according to prosecutors.
Damian Williams, U.S. attorney in Manhattan, stated in a statement that fraud is fraud regardless of whether it happens on the blockchain or Wall Street.
Philip Martin, Coinbase’s chief security officer, stated that the company shared with prosecutors findings from an internal investigation into trading.
Martin tweeted, “We are committed in doing our part for ensuring that all market participants can have access to the exact information.”
Coinbase posted in a blog that it acknowledged that Nikhil Wahi and Ishan had been charged with securities fraud, but that no federal charges were made for securities fraud.
The blog post stated that “No assets on our platform are securities and that the SEC charges are an unfortunate distraction to today’s appropriate law enforcement actions.”
Federal prosecutors in Manhattan indicted a former product manager of OpenSea, an online marketplace that sells non-fungible tokens. He was charged with insider trading. This is the first such case involving digital asset.
