US authorities continue to crack down on insider trading on digital assets. The New York Times reports that federal prosecutors in New York have charged three people with wire fraud related to a cryptocurrency insider trading scheme, including the former Coinbase exchange employee Ishan Wahi. This is the first time officials have filed charges for insider trading in digital currency, according to Southern District of New York attorney Damian Williams.
As with a companion civil case of the Securities and Exchange Commission, prosecutors allege that Wahi shared confidential information about future asset listings with his brother Nikhil Wahi and his brother’s friend Sammer Ramani. The data, split between “at least” June 2021 and April 2022, helped Nikhil and his friend buy assets before the listing boosted their value. The two would then sell their assets for a profit. Purchases of 25 or more assets yielded a profit of more than $1.1 million, according to the SEC.
Coinbase launched an internal investigation in April in response to a Twitter post about unusual business activity. Ishan Wahi booked a flight to India just before Coinbase interviewed him, but he and his brother were arrested in Seattle this morning. Ramani is still at large and is believed to be in India, the SEC said.
Wahi’s lawyers maintained their client’s innocence and said he would “vigorously” defend himself against the charges. Ramani and Wahi’s brother’s attorney did not comment on the charges. Coinbase said it had return information to the Department of Justice and had fired Wahi under a “zero tolerance” policy for this behavior.
This is far from the biggest case in crypto. Lending company BlockFi recently paid $100 million to settle securities violations, while Telegram had to $1.2 billion return to investors for its own violations in addition to paying $18.5 million. However, the accusations are more about sending a warning. The government wants to make it clear that fraud is illegal, whether “on the blockchain or on Wall Street,” as Williams explained to The temperature. This is as much about deterring would-be scammers as it is about punishing defenders.