DOJ Charges Ex-Coinbase Employee in First Cryptocurrency Insider Trading Case

Three individuals, including a former employee at Coinbase (COIN), have been charged with insider trading of cryptocurrencies in what is a first for the crypto market. The United States Department of Justice (DOJ) published a press release on July 21, stating that there was no room for breaking the law in the decentralized technology space. The indictment was unsealed in a federal court in Manhattan, and the charges were made in the Southern District of New York.

Key Takeaways

  • The DoJ charged Ishan Wahi, Nikhil Wahi, and Sameer Ramani with wire fraud conspiracy and wire fraud.
  • The case is the first insider trading case involving cryptocurrency trading.
  • U.S. authorities have come bearing down on the crypto market in recent months and are adamant that the industry must operate within the law.

Ishan Wahi was a former product manager at Coinbase who tipped off his brother Nikhil Wahi and a friend about assets that were soon to be listed on the exchange. When such listings happen, especially on a major exchange like Coinbase, the price of those cryptocurrencies tend to spike considerably. 

The trio generated $1.5 million in profits over ten months from 25 cryptocurrencies, which Ishan Wahi had prior information regarding the listings. The trades took place from at least June 2021 to April 2022, according to the filings. Among the cryptocurrencies traded were Powerledger (POWR), Gala (GALA), XYO (XYO), Alchemix (ALCX), and Tribe (TRIBE).

The DoJ has charged the three individuals with wire fraud conspiracy and wire fraud. Sameer Ramani, the third perpetrator, is still at large, while the two others have been presented at the United States District Court for the Western District of Washington. 

U.S. Attorney Damian Williams was direct in his assessment of the case, saying that the charges were a reminder that web3 must follow the law. Williams was also involved in the first-ever insider trading case relating to NFTs.

Coinbase has provided a response in the wake of the charges. The exchange tweeted on July 21 that it had provided information to the DoJ and that it monitors for illegal activity and investigates alleged misconduct. Chief Security Officer Philip Martin also said that the exchange had terminated the employee and that it was keen on preventing wrongdoing.

The Bottom Line

It is disappointing for many investors to learn that a major exchange has been involved in insider trading, especially at a time when the crypto markets are struggling. It also comes at a time when cryptocurrency regulation around the world is beginning to take shape.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Department of Justice. ''Three Charged In First Ever Cryptocurrency Insider Trading Tipping Scheme.''

  2. Twitter: ''Coinbase identified these individuals and provided information about them to the DOJ. Coinbase proactively monitors for illegal activity and investigates alleged misconduct.''

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Service
Name
Description