U.S. Government Brings Parallel Cases Alleging Insider Trading of Cryptocurrency
The U.S. Attorney’s Office for the Southern District of New York (“SDNY”) has brought the first-ever wire fraud charges against three individuals for insider trading of digital tokens on Coinbase, a cryptocurrency exchange platform. In a parallel action against the same three individuals, the Securities and Exchange Commission (“SEC”) brought a civil case in the U.S. District Court for the Western District of Washington alleging that the cryptocurrencies at issue are securities which were unlawfully traded based on material, nonpublic information. Both actions could have sweeping implications in a rapidly evolving area of the law.
The SDNY indictment alleges that Ishan Wahi, a Coinbase employee involved in listing crypto assets on Coinbase’s exchanges, leaked confidential business information to his brother, Nikhil Wahi, and his friend, Sameer Ramani. According to the indictment, Ishan told the other co-defendants about which assets Coinbase was planning to list and the timing of when those listings would be announced. A crypto asset typically increases in value after Coinbase announces its listing, so the information that Ishan shared with his co-defendants allegedly allowed them to strategically time their purchases of crypto assets shortly before Coinbase’s public announcement of its listings. As a result of the charged scheme, Nikil Wahi and Sameer Ramani allegedly generated gains totaling approximately $1.5 million. Ishan Wahi is charged with two counts and the other two defendants with one count of wire fraud and wire fraud conspiracy. Each count carries a maximum sentence of 20 years.