Why This Former Coinbase Employee Was Charged With Fraud By The FBI
Per a press release from the U.S. Department Of Justice (DoJ), a former Coinbase employee has been arrested for his alleged participation in an inside trading scheme. The main suspect was identified as Ishan Wahi, former product manager at this company.
Authorities also identified Nikhil Wahi, Ishan’s brother, and Sameer Ramani. The suspects have been charged with wire fraud and fraud conspiracy for allegedly profiting from Coinbase’s confidential information regarding new cryptocurrency listing on its platforms.
Two of the suspect were apprehended, the Wahi brothers, while Ramani remains at large. Ishan Wahi was captured on May 16, 2022, while attempting to take a flight to India following internal investigations from Coinbase.
The crypto exchange launched a probe into its internal listing process following a tweet from a popular crypto account. On April 12th, crypto influencer Cobie posted the following via Twitter:
Found 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, rofl.
According to the DoJ press release, this tweet was directly linked to the Coinbase investigation which led to the arrest of two of the suspects. U.S. Attorney Damian Williams said the following on the case, and his office’s efforts to apprehend criminals in the nascent asset class:
Today’s charges are a further reminder that Web3 is not a law-free zone. 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. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them (…).
BTC’s price moving sideways on the 4-hour chart. Source: BTCUSDT Tradingview
The Inside Trading Scheme Build By The Former Coinbase Employee
Ishan Wahi allegedly used his position as a product manager and a key member of the Coinbase listing process to tip off his brother and Ramani. The suspect supposedly earned over $1.5 million from their inside trading scheme from June 2021 to April 2022, when they were exposed by Cobie.
The release claims the suspect placed long positions on centralized exchanges, using accounts held in the name of others, before Coinbase’s listing announcements. The cryptocurrencies rallied after their listing and Nikhil Wahi and Ramani closed their positions for a profit.
Authorities estimate that the suspects used this modus operandi to trade over 14 public listing announcements to benefit from over 25 new crypto trading pairs on the exchange platform. FBI Assistant Director Michael Driscoll claimed the government agency is determined to “protect” the nascent and legacy markets. Driscoll added:
Although the allegations in this case relate to transactions made in a crypto exchange — rather than a more traditional financial market — they still constitute insider trading. As alleged, the defendants made illegal trades in at least 25 different crypto assets and realized ill-gotten gains totaling approximately $1.5 million (…).