US authorities arrested and indicted three individuals over the first case of cryptocurrency insider trading after a Twitter user flagged ther operation.
Last week, three men, including a former Coinbase employee, were charged and arrested by the Us Department of Justice(DOJ) and the Securities and Exchange Commission(SEC). The accused are Ishan Wahl, a former product manager at Coinbase, his brother Nikhil Wahl, and friend Sameer Ramani.
Insider trading refers to trading a company’s securities by individuals with access to confidential or non-public information about the company. Using this privileged access is usually regarded as a breach of the individual fiduciary duty. People caught in the act become liable.
Indictments And Charges Levelled
Accordingly, the DOJ unsealed an indictment accusing the trio of wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading. This represents the first cryptocurrency insider trading prosecuted by the department, and it comes a month after another insider trading charge concerning NFTs.
Consequently, Ishan is charged with two counts of wire fraud conspiracy and two counts of wire fraud, each carrying a maximum sentence of 20 years. Meanwhile, his accomplices have both been charged with one count of wire fraud conspiracy and one count of wire fraud, each carrying a maximum sentence of 20 years.
Meanwhile, the SEC alleges that Ishan Wahi assisted in organizing Coinbase’s public listing announcements. These communiqués contained information about the crypto assets or tokens that would be made available for trading on the exchange. However, despite repeated warnings from Coinbase over using this information for trading, Ishan repeatedly tipped his brother and friend. This lasted for almost a year spanning from June 2021 to May 2022.
While the scheme lasted, Nikhil Wahi and Ramani allegedly bought at least 25 crypto assets. The SEC claims at least nine of these tokens were securities, a notion that Coinbase has debunked. After their purchase and subsequent increase in the value of tokens resulting from the eventual announcement, they sold their holdings. The extensive insider trading scheme resulted in more than $1.1 million of ill-gotten gains.
Blockchain Helps Bust The Operation
Like the Nigerian adage “every day for the thief, one day for the owner,” the entire insider trading operation eventually went bust. Popular Crypto influencer Jordan Fish drew the public’s and authorities’ attention to some fishy businesses he noticed on the blockchain. He revealed that an ETH address was buying tokens mentioned in the Coinbase Asset Listing post day before Coinbase made the announcement.
The blockchain is a distributed ledger best known for supporting cryptocurrencies and other digital assets. At its most basic, it is a shared database where digital data is recorded and saved in “blocks” that are essentially unchangeable, ensuring the chain’s information is secure and verifiable. Through Smart contracts, the blockchain can perform its functions without human intervention.
Following the revelation, Coinbase swung into action and initiated an internal investigation which its CEO Brian Armstrong alluded to. The exchange has been at the forefront of the battle against insecurities violations. It instituted a Crypto rating council in 2019 to assess how digital assets could violate US security laws.
However, insider trading within the crypto industry continues to be widespread. Reports indicate over $1.7 million was generated in profits through the illegal scheme. To that effect, Armstrong and Coinbase overhauled their entire listing process to close existing loopholes.
Ishan had attempted to flee the US for India, booking a one-way flight before authorities apprehended him. The latest development indicates that regulatory authorities have begun to pay close attention to the digital asset space and will attempt to sanitize it.
Do you think more regulation is required to prevent insider trading and other fraud-related transactions from occurring within the crypto industry? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
