Three people allegedly used multiple Ethereum wallets to make purchases of certain tokens in advance of at least 14 separate Coinbase public listing announcements.
United States authorities have brought charges against three people for wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading using crypto, one of whom was a former product manager at Coinbase Global.
In a Thursday announcement, the U.S. Attorney’s Office for the Southern District of New York said in conjunction with the New York Field Office of the Federal Bureau of Investigation it had filed an indictment against former Coinbase Global product manager Ishan Wahi as well as his brother Nikhil Wahi and associate Sameer Ramani. The trio allegedly used confidential information Ishan purportedly obtained from Coinbase in regards to which tokens would be listed on the exchange to make roughly $1.5 million in gains from trading 25 different cryptocurrencies.
Three charged in first ever cryptocurrency insider trading tipping scheme https://t.co/cdTcwQQOau
— US Attorney SDNY (@SDNYnews) July 21, 2022
According to the authorities, Ishan was privy to certain information on listing cryptocurrencies on exchanges controlled by Coinbase in his position as a product manager from August 2021 to May 2022, including the launch dates of tokens. The U.S. Attorney’s Office alleged that from June 2021 to April 2022, Ishan passed on information related to the launch date of tokens to his brother or Ramani to invest in the cryptocurrencies before an anticipated price jump due to a major exchange like Coinbase listing the asset.
The trio allegedly used the insider trading scheme on at least 14 separate Coinbase public listing announcements, using multiple Ethereum blockchain wallets to make and transfer the purchases, and accounts at centralized exchanges in others’ names. Before a major listing announcement by Coinbase on April 11, online sleuths discovered several Ethereum wallets had purchased large amounts of six tokens, prompting claims of insider trading.
“Although the allegations in this case relate to transactions made in a crypto exchange — rather than a more traditional financial market — they still constitute insider trading,” said FBI assistant director Michael Driscoll.
CEO Brian Armstrong said at the time that “there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity” and the exchange would conduct investigations and coordinate with outside law firms if needed.
“If these investigations find that any Coinbase employee somehow aided or abetted any nefarious activity, those employees are immediately terminated and referred to relevant authorities (potentially for criminal prosecution),” said Armstrong in April.
The U.S. Attorney’s Office reported that Coinbase’s director of security operations contacted Ishan on May 11 to arrange a meeting related to the exchange’s asset listings. Ishan attempted to board a one-way flight to India in advance of the scheduled May 16 meeting, but was stopped by law enforcement.
This story is developing and will be updated.