In the first bitcoin insider trading case, three persons, including a former product manager at Coinbase Global, have been charged with wire fraud.
Ishan Wahi and his brother Nikhil Wahi were detained by law enforcement on Thursday in Seattle. Both men are product managers at a bitcoin exchange.
The US Securities and Exchange Commission has civil charges against them and a third defendant, their buddy Sameer Ramani, for similar offenses. There is no sign of Ramani.
Ishan Wahi, 32, is “innocent of all charges and wants to firmly defend himself,” according to a statement from his attorneys. Requests for feedback from Nikhil Wahi’s legal counsel were not immediately fulfilled. A lawyer representing Ramani was not immediately available to Reuters.
Ishan Wahi, according to the prosecution, divulged secret information on upcoming announcements of new digital assets that Coinbase will permit customers to trade on its platform.
They added that after being called in for a meeting by a Coinbase security director, Ishan Wahi purchased a one-way ticket to India. According to authorities, law enforcement prevented him from boarding the flight on May 16.
At his first court appearance in Seattle federal court, Ishan Wahi was given instructions to surrender his passport, and his bond was set at $1 million. The prosecution did not urge that he be kept, notwithstanding his obvious attempt to avoid being apprehended. He will appear in Manhattan court for the next time on August 2.
In the related civil allegations, Nikhil Wahi, 26, and Ramani, 33, are charged with buying and selling at least 25 crypto assets for a profit, nine of which the SEC alleges it has identified as securities.
The SEC would not say if it would sue Coinbase for listing the currencies listed in the complaint as securities, saying only that it was still conducting an investigation.
Before Coinbase’s disclosures in June 2021 and April 2022, Wahi and Ramani reportedly utilized Ethereum blockchain wallets to purchase the assets and traded at least 14 times, making at least $1.5 million in unauthorized profits.
Whether it happens on Wall Street or the blockchain, fraud is fraud, according to US Attorney in Manhattan Damian Williams.
The business disclosed information from the internal investigation into the transaction with authorities, according to Philip Martin, the chief security officer at Coinbase.
Martin stated on Twitter, “We are dedicated to doing our share to guarantee that all market participants have access to the same information.
Ishan, Nikhil Wahi, and Ramani were all charged with securities fraud separately by the SEC, but federal prosecutors did not bring such charges, according to Coinbase, which recognized this in a blog post.
According to the blog post, “No assets posted on our platform are securities, and the SEC allegations are a regrettable diversion from today’s appropriate law enforcement action.”
In what they called the first case of its kind involving digital assets, federal prosecutors in Manhattan last month accused an ex-product manager at OpenSea, the largest online marketplace for non-fungible tokens, of insider trading.