Former Coinbase manager charged in first-ever cryptocurrency insider-trading fraud case
The Justice Department announced criminal charges against Ishan Wahi, a former product manager at Coinbase, alleging that he provided confidential information about upcoming token listings on at least 14 occasions, information that His friend and brother benefited from $1.5 million.
In a press release, the agency alleged that the trio conducted illegal trades involving at least 25 different tokens, buying the tokens before they were listed on Coinbase, and then selling them shortly after.
The cryptocurrency community has long used the term “Coinbase Effect” to describe the pop-in price of a token that coincides with its listing on the platform.
“After receiving tips from Ishaan Wahi, Nikhil Wahi and [Sameer] Ramani used anonymous Ethereum blockchain wallets to acquire crypto assets, shortly before Coinbase publicly announced that they is listing or considering listing crypto assets on its exchange,” the Department of Justice release said.
The release also said that the trio tried to cover their tracks by using accounts in centralized crypto exchanges held in others’ names and that they “made transactions without any transactions to conceal their involvement in the scheme.”
In response to a request for comment, a Coinbase spokesperson cited a recently updated blog post that now states, “Once we gathered enough evidence to believe our suspicions, we provided information about these individuals to DOJ and terminated our employee. We appreciate DOJ’s acknowledgment of our assistance in holding these individuals accountable.”
According to the Justice Department, a Coinbase security official asked Wahee to appear for personal meetings in mid-May. In response, Wahi allegedly tried to flee to India on a one-way ticket but was intercepted by law enforcement agencies just before boarding.
Wahi and his brother and friends all face charges of wire fraud and conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison.
“Today’s charges are another reminder that the Web3 is not a law-free zone. Just last month, I announced the first insider trading case involving NFTs, and today I announced the first insider trading case involving cryptocurrency markets. “Our message is clear with these charges: fraud is fraud, whether it’s on the blockchain or on Wall Street,” said U.S. Attorney Damian Williams.