The Department of Justice (DOJ) stated that based on information provided by the former Coinbase employee, his brother and an accomplice received about $1.5 million in profits.
On July 21st, the United States Department of Justice arrested former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi and charged Sameer Ramani with wire fraud.
The charges were filed about what the DOJ characterised as the “first-ever cryptocurrency insider trading” scheme. Ramani is on the run from the authorities.
In a DOJ statement, the U.S. Attorney for the Southern District of New York, Damian Williams, stated that their message with these charges is clear: fraud is a fraud, whether it happens on the blockchain or Wall Street.
And the Southern District of New York will continue to bring fraudsters to justice regardless of where they are found.
According to the charges, the defendants engaged in illegal transactions involving at least 25 distinct cryptocurrencies and made nearly $1.5 million.
Ex-Coinbase Manager Arrested in US Crypto Insider-Trading Case. finance.yahoo
The crime
The DOJ said that the value of cryptocurrencies usually surged dramatically. The exchange maintained the confidentiality of all information linked to public listing announcements and forbade its employees from disclosing such data or offering financial advice.
Ishan joined Coinbase in October 2020 as a product manager on the asset listing team. In his position, Ishan was aware of the assets the exchange intended to list and the date of their public disclosures, according to the press statement.
Between June 2021 and April 2022, Ishan disclosed secret listing announcement information to either his brother Nikhil or his friend and colleague Ramani. Those who acted on the advice of Ishan, Nikhil, or Ramani could purchase the assets in advance using anonymous Ethereum wallets and sell them for a profit when the price rose after the Coinbase listing announcement.
According to Ishan, the press notice said that Nikhil and Ramani used confidential tips for at least 14 Coinbase listing announcements involving at least 25 different assets. Nikhil and Ramani concealed their transactions by using centralised exchange accounts in the names of others and transferring cash and earnings to many anonymous or fresh Ethereum wallets.
Catching the criminal
Several significant transactions prompted investigations before Coinbase’s announcement that it was contemplating listing a few tokens.
Cobie, a well-known crypto celebrity, tweeted on April 12th that someone had purchased approximately $390,000.00 worth of Coinbase-listed assets only 24 hours before the list was made public. Ramani handled Cobie’s wallet transactions.
During Coinbase’s inquiry, the exchange’s director of security operations contacted Ishan on May 11th to schedule a face-to-face interview for May 16th. Ishan was confirmed to attend, but a day before the interview, he booked a one-way trip to India for the day of the interview.
However, Ishan fraudulently reported to coworkers that he had left for India on May 15th. In the hours between purchasing his trip and his intended departure, Ishan contacted Nikhil and Ramani about the Coinbase probe and supplied a screenshot of the texts he got from the head of security operations, the report said.
Authorities detained Ishan and stopped him from leaving the country before he could catch his aircraft.
The maximum statutory punishment for each count of conspiracy to commit wire fraud and wire fraud is 20 years. However, if the defendants are found guilty, they will be sentenced by a court.
The Securities and Exchange Commission (SEC), which aided with the investigation, filed civil accusations of securities fraud against the defendants on July 21st.