A former Coinbase Global product manager and two others have been charged with wire fraud in the first cryptocurrency insider trading case, according to US prosecutors in Manhattan on Thursday.
Ishan Wahi, the cryptocurrency exchange’s product manager, and his brother Nikhil Wahi were placed under arrest in Seattle on Thursday.
They, along with a third defendant, their friend Sameer Ramani, are also facing related SEC civil charges. Ramani is still at large.
Lawyers for Ishan Wahi, 32, said in a statement that he is innocent of all offenses and intends to robustly defend himself. Nikhil Wahi’s lawyer did not right away answer requests for comment. Reuters was not able to locate a lawyer for Ramani right away.
According to prosecutors, Ishan Wahi shared classified information about upcoming announcements of new cryptocurrency assets that Coinbase would enable users to trade through its exchange.
They also claimed that Ishan Wahi purchased a one-way plane ticket to India after a Coinbase security director convened him to the company’s Seattle office for a meeting. Prosecutors said he was barred from boarding the flight on May 16.
Ishan Wahi’s bail was set at $1 million at his initial appearance in federal court in Seattle, and he was ordered to surrender his passport. Despite his alleged attempt to flee, prosecutors did not request that he be detained. His next federal court appearance is scheduled for August 2 in Manhattan.
The SEC claimed in the related civil charges that Nikhil Wahi, 26, and Ramani, 33, purchased and sold at least 25 crypto assets for a profit, nine of which it claimed were securities.
An SEC official stated that the investigation was ongoing and declined to comment on whether the SEC would take action against Coinbase for listing the tokens described as securities in the complaint.
Wahi and Ramani allegedly acquired the assets using Ethereum blockchain wallets and traded at least 14 times between June 2021 and April 2022 prior to Coinbase’s announcements, generating at least $1.5 million in illicit gains, according to prosecutors.
Fraud is a fraud, irrespective of its occurrence – be it on the blockchain or Wall Street, Manhattan U.S. Attorney Damian Williams said in a statement.
Coinbase’s chief security officer, Philip Martin, stated that the company had shared findings from an internal investigation into the trading with prosecutors.
We are committed to doing our part to make certain that all market participants have equal access to information, Martin said on Twitter.
Coinbase acknowledged in a blog post that the SEC had individually filed securities fraud charges against Ishan, Nikhil Wahi, and Ramani, but that federal prosecutors did not indict securities fraud.
There are no securities assets listed on our platform, and the SEC charges are an unfortunate distraction from today’s apt law enforcement action, according to the blog post.
In what the prosecutors reported as the first such case involving digital assets, federal prosecutors in Manhattan indicted a former product manager at OpenSea, the largest online marketplace for non-fungible tokens, for insider trading last month.
