NEW YORK (AP) — A former Coinbase product manager and his brother, along with a Houston man, were charged Thursday in what federal authorities described as the U.S. government’s first cryptocurrency bust. case of insider trading.
The brothers – Ishan Wahi and Nikhil Wahi – were arrested while Houston man Sameer Ramani remained at large, federal authorities said as they announced the indictment in Manhattan federal court.
Authorities said Ishan Wahi, 32, was a product manager at Seattle-based Coinbase Global Inc., one of the world’s largest cryptocurrency exchanges, when he tipped Nikhil Wahi, 26, and their friend, Ramani, 33 years old. All three were charged with conspiracy to commit wire fraud and wire fraud.
The indictment said Ishan Wahi was detained by law enforcement before boarding a May 16 flight to India and prevented from leaving the country. In the hours before the flight, he had called and texted his brother and Raman to notify them of an investigation Coinbase was conducting, according to a release.
Ishan Wahi bought a one-way plane ticket to India in an “unsuccessful attempt to flee the United States” after agreeing to be interviewed for an internal investigation by Coinbase, the indictment said.
US Attorney Damian Williams said the prosecution represents the first government insider trading case involving cryptocurrency markets. He said it was a reminder that cryptocurrency markets are not a lawless zone.
Michael Driscoll, head of the FBI’s New York office, said the defendants amassed about $1.5 million in illegal profits trading at least 25 different crypto assets.
Attorneys representing Ishan Wahi said in an email to The Associated Press that their client is innocent and “intends to vigorously defend himself against these charges and in the SEC action.”
Messages seeking comment were sent to other defense attorneys.
The Securities and Exchange Commission filed civil insider trading charges against the men in federal court in Seattle.
The SEC said the charges were brought against the trio after they conducted a scheme to trade ahead of multiple announcements about certain crypto assets that would be made available for trading on the Coinbase platform.
“As today’s case demonstrates, whether in stocks, options, crypto assets, or other securities, we will live up to our mission by identifying and combating insider trading in securities wherever we see it,” Carolyn said. M. Welshhans, Acting Chief of the Enforcement Division. Crypto Assets and Cyber Entity.
The New York indictment said Ishan Wahi began working as a product manager on the asset listing team in October 2020. He said he provided confidential information advice to his brother and friend from June 2021 to April this year.
Brian Armstrong, chief executive officer for Coinbase, said on Twitter and in a blog post Thursday that the company began an internal investigation in April “regarding potential cashing of assets shortly before listing on Coinbase.”
The indictment said the lead was publicly identified by a tweet in April to an account “that is well-known in the crypto community, with hundreds of thousands of followers.”
Armstrong said the company gathered enough evidence and then fired Ishan Wahi and forwarded its findings about the three men to the Justice Department.
He added: “We will investigate and refer bad actors to law enforcement and they will face real legal consequences including serving time in prison.”
