Three Charged With Insider Trading of Cryptocurrency Assets


Federal authorities filed criminal and civil charges against a former Coinbase employee and two other men in an insider trading case involving confidential information about cryptocurrency assets that were about to be posted on Coinbase’s exchange, according to charging documents filed on Thursday.

The three men were involved in trades over a period of 10 months using information about 14 listings on Coinbase that generated about $1.5 million in illegal profits, according to federal prosecutors in Manhattan. The men were charged criminally with three counts of wire fraud and conspiracy to commit wire fraud.

The case was the first time the authorities had filed criminal insider-trading charges involving cryptocurrency assets, said Damian Williams, the U.S. attorney for the Southern District of New York.

The prosecutors, as well as the Securities and Exchange Commission in civil charging documents, said Ishan Wahi, who at the time was part of a Coinbase team that listed assets on the exchange, passed on confidential information about when some cryptocurrency assets would be listed to his brother, Nikhil Wahi, and his brother’s friend, Sammer Ramani.

Nikhil Wahi and Mr. Ramani used that information to buy the assets before Coinbase announced they’d be listed, authorities said. After the announcement, the men sold the assets for a profit.

The alleged scheme came to light after Coinbase in April began an internal investigation in response to a post on Twitter about unusual trading.

IshanMr. Wahi had booked a flight to India just before he was to be interviewed by the company as part of the investigation. The authorities said he tipped off his brother and his brother’s friend about the interview as well. Mr. Wahi and his brother were arrested on Thursday morning in Seattle. Mr. Ramani remains at large, the authorities said.

Lawyers for the Wahi brothers did not immediately respond to requests for comment. Mr. Ramani couldn’t immediately be reached for comment. The S.E.C. said that Mr. Ramani is a Houston resident but that it believed he was in India.

The charges suggest that federal authorities are prepared to crack down on illicit trading in the world of digital assets in much the same way they have pursued such crimes in the stock, bond and commodity markets.

“Our message with these charges is clear: Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street,” Mr. Williams, the U.S. attorney, said.

The S.E.C. said the cryptocurrency assets listed on Coinbase’s exchange are considered securities and, therefore, can be regulated like stocks or bonds — a stance that many in the digital currency world have objected to.

Last month, federal prosecutors brought an insider trading case involving the use of confidential information to purchase another kind of digital assets, nonfungible tokens, or NFTs. In that case, the authorities charged a former employee of an NFT marketplace with misappropriating confidential information about the timing of public listings for the digital tokens.

The two cases “are just the beginning of the D.O.J.’s crack down on insider trading in the crypto space,” said Ian McGinley, a former Justice Department prosecutor. “Both of these cases are for relatively small amounts, but D.O.J. brought them to send a message — they are watching.”

In a post on Coinbase’s website, the company’s chief executive, Brian Armstrong, said that Coinbase had turned over information about the three men to the Justice Department and had ended Mr. Wahi’s employment. “We have zero tolerance for this kind of misconduct and will not hesitate to take action against any employee when we find wrongdoing,” he wrote.



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