The U.S. Department of Justice (DOJ) has charged three individuals with the first ever cryptocurrency insider trading scheme. Among the three accused is Ishan Wahi – a former product manager at Coinbase.
Exploiting Coin Listing Knowledge
According to the DOJ’s press release, Ishan Wahi has been specifically charged with both wire fraud conspiracy and wire fraud. Charged alongside him are his brother Nikhil Wahi and friend Sameer Ramani. Each charge carries a maximum sentence of 20 years.
The product manager allegedly committed insider trading by exploiting confidential information about which tokens the exchange would list next. He repeatedly informed his brother and friend about such listings before they were announced publicly. This reportedly occurred on 14 separate occasions dating back to June 2021.
All three would then use anonymous Ethereum addresses to acquire those assets before they were listed. Shortly after each listing reveal, both the brother and friend would sell those assets at a profit. By using this scheme across 25 different tokens, the group generated $1.5 million in realized and unrealized gains.
Normally, such schemes would be easily spotted given that centralized exchanges like Coinbase collect identifying information from all customers. However, both Nikhil Wahi and Ramani utilized centralized accounts held in others names to initially procure the tokens. They then transferred them through multiple anonymous Ethereum addresses while attempting to cover their tracks.
“Today’s charges are a further reminder that Web3 is not a law-free zone,” said U.S. Attorney Damian Williams regarding the case.
Williams was also responsible for announcing the first insider trading case related to NFTs last month. In a similar fashion to Wahi, an OpenSea employee had used insider information to purchase new NFTs prior to their public listing on the Marketplace.
“Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street,” he added.
Employee Escape Attempt
Product manager Wahi and his brother were arrested in Seattle, Washington on Thursday, while Ramani remains at large. Before being arrested, Wahi reportedly attempted to flee the United States to India in May.
His escape attempt followed public notice from Coinbase in April that it would immediately terminate any employee that leaked confidential information. About two weeks later, Wahi was emailed by Coinbase’s director of security operations to appear for an in-person meeting at the company’s Washington office.
Wahi initially said he would attend the meeting, but canceled on the evening of May 15th. He falsely claimed that he was already in India at that time, even though he was scheduled to board his flight the next day. However, he was stopped by law enforcement before he could escape.