Judgment in cryptocurrency insider trading trial: Ex-Coinbase manager sentenced to two years in prison

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Forex in this article

• Former Coinbase employee leaked confidential information
• Accomplices used knowledge of upcoming token listings for “illegal gains”
• Escape attempt by ex-Coinbase employee foiled – prison sentence of several years

On May 9, former Coinbase product manager Ishan Wahi was sentenced. Prosecutors for the Southern District of New York announced in a press release that Wahi will be jailed for two years for his misconduct. The defendant had previously pleaded guilty. During his tenure at the crypto exchange, Wahi purposefully used confidential information about upcoming token listings to engage in insider trading with his brother and a friend.

Access to confidential information exploited

According to US Attorneys, Ishan Wahi worked as a product manager at Coinbase as of October 2020, assigned to a team dealing with the listing of new crypto assets. “In this role, Ishan Wahi was involved in the highly confidential process of listing crypto assets on Coinbase’s exchanges and had detailed and extensive knowledge of which crypto assets Coinbase intended to list and when public announcements regarding those crypto assets listings should be made,” the press release said. Although Coinbase has classified this information as strictly confidential and prohibited employees from discussing it with others or even giving advice on which to act, Wahi has done just that.

According to the press release, the then Coinbase product manager informed both his brother Nikhil Wahi and his friend Sameer Ramani about upcoming coin and token listings on the crypto trading platform. Such a listing of a crypto asset on a major crypto exchange like Coinbase – or even just its announcement – is in many cases associated with a price boost for the asset, making it more accessible and tradable. Ishan Wahi and his co-conspirators apparently wanted to take advantage of these expected price gains and, according to the US Attorney’s Office, invested in tokens on at least 14 occasions between June 2021 and April 2022, the listing of which on Coinbase was publicly announced shortly afterwards. In doing so, they “entered into illicit dealings in at least 25 different crypto assets and made ill-gotten gains totaling approximately $1.5 million,” FBI Assistant Director Michael J. Driscoll is quoted as saying in a July 2022 press release accompanying the indictment.

Twitter user notices suspicious wallet despite obfuscation tactics

After receiving Ishan Wahi’s tips, Nikhil Wahi and Sameer Ramani used anonymous Ethereum blockchain wallets to acquire the corresponding crypto assets. To hide the purchases, prosecutors said they also used accounts at central exchanges maintained on behalf of others and transferred funds, crypto assets and proceeds through multiple anonymous Ethereum blockchain wallets. In addition, Nikhil Wahi and Ramani regularly created new Ethereum blockchain wallets with no prior transaction history to further obfuscate their machinations. After the respective listing announcements by Coinbase, the corresponding crypto assets were then sold again at a profit.

According to a press release from the US Attorney’s Office, insider trading was blown up primarily by a crypto influencer who pointed out an ETH address on Twitter that was exactly the same there around 24 hours before a listing announcement by Coinbase for several hundred thousand US dollars said token. Coinbase then investigated the incident and identified Ishan Wahi as the culprit. When his machinations were exposed and he was called to a meeting by his employer, Wahi apparently tried to warn his accomplices and flee to India, but was stopped by the police at the airport. Then, on July 21, both Ishan Wahi and his brother Nikhil were arrested and charged along with Sameer Ramani “on charges of conspiracy to commit wire fraud and wire fraud in connection with an attempt to engage in insider trading of cryptocurrency assets using confidential Coinbase information.”

US prosecutor sees the verdict as an important signal for the crypto industry

After his brother, who according to “BTC-ECHO” had already been sentenced to ten months in prison in January, Ishan Wahi must now go to prison for two years. However, the four charges against him could have resulted in an even longer prison sentence: According to the US Attorney’s Office, the maximum sentence for each charge is 20 years in prison. In addition to the prison sentence, Wahi must also return various crypto assets that he received in connection with the insider trading.

“Today’s ruling should send a strong signal to all participants in the cryptocurrency markets that the laws clearly apply to them. The Southern District of New York will hold those engaged in insider trading fully accountable, regardless of whether their illegal conduct is attributable to the… stock markets or the crypto-asset market,” US Attorney Damian Williams commented on the verdict, according to the press release.

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