A now-former Coinbase manager, his brother, and a friend were today charged with wire fraud conspiracy and wire fraud in connection with the first-ever cryptocurrency insider trading scheme in the US.
Ishan Wahi, a 32-year-old ex-product manager at Coinbase Global who lives in Seattle, Washington, and his 26-year-old brother Nikhil Wahi, also from Seattle, were arrested Thursday morning.
A third co-conspirator, 33-year-old Sameer Ramani, of Houston, Texas, remains at large.
The US Department of Justice and FBI allege the three men pulled off a $1.5 million insider trading scheme by using confidential Coinbase information about which crypto-assets were scheduled to be listed on Coinbase’s exchanges.
It’s claimed Ishan Wahi tipped off his brother Nikhil and/or Ramani, who then bought the digital tokens on the assumption that their value would rise once listed.
In addition to the criminal charges, the US Securities and Exchange Commission filed [PDF] a separate insider trading complaint against the three men.
As a Coinbase product manager assigned to the financial giant’s asset listing team, Ishan Wahi was privy to advanced knowledge of which cryptocurrencies Coinbase planned to list, according to court records.
Additionally, we’re told Wahi was a member of a private Coinbase messaging channel reserved for a select few employees with direct involvement in the asset listing process. This was used to discuss, among other things, “exact announcement/launch dates + timelines” that weren’t shared with the rest of the Coinbase staff.
Wahi knew this information was highly confidential, according to the indictment, but he allegedly passed it along to his brother and friend for their financial gain.
On “numerous occasions” beginning around June 2021 and continuing through April 2022, Ishan Wahi knew in advance that Coinbase planned to list particular assets, and he knew when the cryptocurrency exchange planned to make these listings public, the prosecution’s court documents claim.
He then allegedly “misappropriated this Coinbase confidential information” when he provided it to Nikhil Wahi and/or Sameer Ramani, so they could snap up the tokens ahead of the public listing and sell them for a profit later. These crypto-assets are said to include: TRIBE, XYO, ALCX, GALA, ENS, and POWR.
After receiving these confidential Coinbase details, Nikhil Wahi and Sameer Ramani allegedly used anonymous Ethereum blockchain wallets to acquire certain crypto assets before Coinbase announced anything publicly. According to an indictment:
Still, all good schemes must come to an end. And for the alleged nefarious trio that end came in April.
In early April, Ishan Wahi allegedly learned that Coinbase planned to announced it was considering listing dozens of crypto assets on its exchanges. Per usual, he allegedly tipped off Ramani, who, we’re told, caused multiple anonymous Ethereum blockchain wallets to purchase large quantities of the crypto assets slated for inclusion in Coinbase’s April 11 listing announcement.
On April 12, however, a Twitter account that the Feds describe as “well known in the crypto community, with hundreds of thousands of followers,” tweeted about identifying an Ethereum wallet “that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published.”
Coinbase replied via tweet and said it was investigating the matter.
Wahi allegedly attempted to flee the US
Court documents reveal that a month later, Coinbase’s director director of security operations emailed Ishan Wahi to set up an in-person meeting relating to the company’s asset listing process. After confirming that he’d be there, Wahi purchased a one-way flight to India and warned his brother and Ramani about Coinbase’s investigation, it is claimed.
Before boarding a flight on May 16, however, law enforcement stopped Wahi and prevented him from leaving the US.
Ishan Wahi, who is no longer with Coinbase, is charged with two counts of wire fraud conspiracy and two counts of wire fraud, each of which carries a maximum sentence of 20 years.
Nikhil Wahi is charged with one count of wire fraud conspiracy and one count of wire fraud, each of which carries a maximum sentence of 20 years.
Ramani is charged with one count of wire fraud conspiracy and one count of wire fraud, each of which carries a maximum sentence of 20 years.
“Today’s charges are a further reminder that Web3 is not a law-free zone,” said US Attorney Damian Williams in a statement. “Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets.”
These criminal charges should send a clear message to crooks, he added. “Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.” ®