Former Coinbase product manager arrested on insider trading charges

Quick Take

  • A former employee at Coinbase was arrested and charged with wire fraud on Thursday.
  • His brother and friend also face charges in connection to an inside trading scheme, which profited them at least $1.5 million, according to law enforcement officials.
  • In separate charges, the SEC claims that at least nine of the assets traded were securities.

A former product manager at Coinbase, Ishan Wahi, was arrested Thursday on charges of wire fraud in connection to an insider trading scheme, according to a statement from the Department of Justice (DOJ).

Wahi, who worked within the assets listing team, repeatedly tipped his brother Nikhil Wahi and friend Sameer Ramani — who also both face the same charges — about new coins that were slated to be listed on Coinbase, the statement said.

The two profited at least $1.5 million in illegal trades from 25 different crypto assets and at least 14 separate Coinbase public listings, in what US Attorney Damian Williams described as "the first ever insider trading case involving cryptocurrency markets."

"Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street," Williams said.

While the trading happened at least between June 2021 and April 2022, the DOJ refers to one incident in particular, on April 11, 2022, when Coinbase announced that it was going to potentially list dozens of coins.

The statment points to a tweet from crypto investor and commentator Cobie referring to "an ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published."

That tweet was apparently describing Ramani's activity, the DOJ said, adding also that he and Wahi "caused multiple anonymous Ethereum blockchain wallets to purchase large quantities of at least six of the crypto assets" included in that listing.

After being called for an in-person meeting regarding a Coinbase internal investigation, Ishan Wahi attempted to fly out to India on May 15, but was stopped at the airport by law enforcement.

Wahi and Ramani tried to conceal the crypto purchases they made before new listings were announced by using centralized exchanges accounts with other people's names and transferring the funds through multiple anonymous Ethereum wallets, according to the statement.

The Securities and Exchange Commission (SEC) has also filed a complaint in parallel with the DOJ.

In it, the agency claims that at least nine of the assets traded by Wahi and Ramani were securities.

"We are not concerned with labels, but rather the economic realities of an offering," said Gurbir Grewal, director of the SEC’s Division of Enforcement. "In this case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase."

Coinbase refuted the idea that any of the coins traded were securities.

"No assets listed on our platform are securities, and the SEC charges are an unfortunate distraction from today’s appropriate law enforcement action," the company said in an update to a blog post about its asset listing processes.

The two brothers were both arrested in Seattle, but Ramani remains at large. They were all charged by the DOJ with two counts of wire fraud conspiracy and two counts of wire fraud.

The SEC charged the three with violating the antifraud provisions of the securities laws and is seeking permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties.

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