A former Coinbase worker was arrested and charged for his alleged role in a brazen insider trading scheme involving cryptocurrencies listed on the platform, the feds said on Thursday.
Ishan Wahi, a 32-year-old ex-product manager at Coinbase, is accused of tipping off his brother, Nikhil Wahi, and a friend, Sameer Ramani, concerning the company’s confidential plans to start offering certain digital tokens.
The alleged fraudsters used the data to purchase the cryptocurrencies just before they were publicly listed and experienced a surge in value.
The scheme allegedly allowed the trio to amass not less than $1.5 million in profits, based on court documents and a Justice Department release. Ramani and Nikhil Rahi traded not less than two dozen crypto assets upfront of public listing announcements from not less than in June 2021 through April 2022.
“Although the allegations on this case relate to transactions made in a crypto exchange – somewhat than a more traditional financial market – they still constitute insider trading,” FBI Assistant Director Michael Driscoll said in an announcement.
“Today’s motion should exhibit the FBI’s commitment to protecting the integrity of all financial markets – each ‘old’ and ‘recent,’” he added.
The DOJ described the situation because the “first ever cryptocurrency insider trading tipping scheme.”
The Wahi brothers were arrested in Seattle on Thursday morning and were set for a court hearing on the costs later within the day. Ramani has been charged and “stays at large,” based on the DOJ.
The SEC has also filed suit against Ishan Wahi for violating its anti-fraud rules, based on Bloomberg.
Ishan Wahi was charged with two counts of wire fraud conspiracy and two counts of wire fraud. Each charge has a maximum sentence of 20 years in prison. His brother and Ramani face similar charges.
The feds alleged that Nikhil Wahi and Ramani used accounts held under different names in addition to anonymous Ethereum blockchain wallets in a bid to hide their trading activity.
Coinbase CEO Brian Armstrong said the corporate forwarded its findings to the feds.AFP via Getty Images
When confronted concerning the allegations, Ishan Wahi purportedly bought a one-way ticket to India and attempted to flee the country, but was stopped from doing so by law enforcement.
Coinbase addressed the situation in a lengthy blog post attributed to CEO Brian Armstrong. The corporate said it launched an internal investigation into allegations of “frontrunning of certain assets ahead of an organization announcement.”
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The corporate said it turned over its findings to DOJ officials and fired the worker who participated within the scheme. Coinbase didn’t mention Wahi by name.
“Coinbase takes allegations of improper use of company information very seriously, as demonstrated by our rapid investigation of this matter. Again, we have now zero tolerance for this sort of misconduct and is not going to hesitate to take motion against any worker after we find wrongdoing,” the blog post said.
“We understand that the SEC has individually filed securities fraud charges related to this wrongdoing today,” the post added. “The DOJ didn’t charge securities fraud. No assets listed on our platform are securities, and the SEC charges are an unlucky distraction from today’s appropriate law enforcement motion.”
The Post has reached out to Coinbase for further comment.
Bloomberg was first to report on the arrests. Representatives for the accused parties didn’t return the outlet’s requests for comment.
The case marks the most recent setback for Coinbase, which recently conducted sweeping layoffs during a downturn within the cryptocurrency market.