The Brief: The parties that worked at Coinbase knew what Crypto Coins would be listed on the Coinbase network, and pretty much every coin ever listed on their site proceeds to have a huge spike in price. The parties knew ahead of time what would be listed, allegedly bought the coins directly, and when it was announced they would be listed would sell at a higher price.
On Thursday, the Department of Justice announced charges against three individuals who are alleged to have traded on insider knowledge regarding the tokens that Coinbase would list on its cryptocurrency exchange.
- U.S. Attorney Damian Williams stated, “Our message with these allegations is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.”
Why it’s important: Coinbase is the leading Crypto Exchange in the United States, which is the world’s largest market for cryptocurrencies. This would be the first step in the Crypto market to becoming fully regulated within the United States. There is some regulation, but up until this point, there were no hard-set rules as far as the physical trading of securities and the proprietary knowledge when it comes to Crypto.
- The U.S. Securities and Exchange Commission (SEC), which made an announcement on Thursday, was involved in the filing of the complaint.
What They Are Saying: According to a press release from Carolyn Welshhans of the SEC’s cyber division, “In nearly a year, the defendants collectively earned over $1.1 million in illegal profits by engaging in an alleged insider trading scheme that repeatedly used material, nonpublic information to trade ahead of Coinbase listing announcements.”
The Details Of The Case: Ishan Wahi, a 32-year-old product manager from Seattle who worked on the asset listing team at Coinbase, is described in detail. As a result, he got access to discussions taking place within the exchange regarding which coins will be listed there.
- The announcement says that in order to buy tokens ahead of the stated listings and sell them for a profit, he worked with his brother Nikhil Wahi, 26, also of Seattle, and a friend named Sameer Ramani, 33, of Houston.
- The Wahis were taken into custody in Seattle early on Thursday. Ramani, who was charged as well, is still at large.
- Two counts of wire fraud conspiracy and two counts of wire fraud were brought against Ishan Wahi. Ramani and his brother were each accused of one count.
- Ishan Wahi was asked to come in for an interview by Coinbase in May, and according to the announcement, after he was asked he tried to flee the country but was stopped by Law Enforcement before he could.
- The indictment describes transactions involving a number of tokens, such as TRIBE, XYO, ENS, and POWR.