Coinbase’s situation is becoming increasingly grim with each passing day. Over the previous few months, the company has been beset with nothing but disasters. Ishan Wahi, a former Coinbase (COIN) product manager, was charged by the U.S. Department of Justice (DOJ) with insider trading. On Thursday, his brother Nikhil Wahi and Sameer Ramani were indicted with wire fraud and insider trading.
On the heels of a slew of high-profile bitcoin fraud cases, the Securities and Exchange Commission (SEC) has charged three individuals for allegedly participating in an unprecedented crypto insider trading tipping scheme. The charges claim that the persons planned to exploit sensitive Coinbase knowledge about which cryptos were on track to be listed on Coinbase’s exchanges.
According to the SEC’s statement announcing its separate action, at least nine assets were “securities.” This designation indicates that the SEC is taking a more inclusive approach toward the regulation of crypto tokens. The SEC generally regulates equities, while the CFTC is in charge of currency trading.
Coinbase ex-product manager accused of insider trading
In a press release, U.S. Attorney Damian Williams of the Southern District of New York said this was the second instance in which the DOJ had charged an insider trader in crypto. According to the news, some of the cryptocurrencies traded include TRIBE, ALCX, XYO, GALA, ENS, and POWR.
According to the DOJ’s news release, Ishan Wahi allegedly gave information about at least 14 different Coinbase listings. The accused used pseudonymous Ethereum wallets and exchange accounts in other people’s names to acquire at least 25 crypto coins worth approximately $1.5 million (according to the SEC report, the figure is closer to $1.1 million).
The DoJ’s charge also mentioned a Cobie tweet that linked an Ethereum address to “hundreds of thousands of dollars” worth of tokens purchased on a Coinbase asset listing post before the exchange actually released it.
The U.S. Attorney’s statement also says that Ishan Wahi attempted to flee to India before his Coinbase security department appointment was due. However, he was prevented from leaving owing to the influence of law enforcement. Ishan Wahi has been on the authorities’ radar for months and was arrested on Thursday.
When he first appeared in Seattle federal court, bail was set at $1 million for Ishan Wahi. He was also asked to surrender his passport. Despite his reported attempt to flee, prosecutors did not ask that he be detained. His next federal court appearance will be on August 2 in Manhattan.
Today I announce the first-ever insider trading case involving cryptocurrency markets. Today’s charges are a further reminder that Web3 is not a law-free zone. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them.
U.S. Attorney Damian Williams
The crypto entity will not be charged with insider trading. According to the DOJ, Coinbase was also looking into allegations of insider trading. The crypto exchange has backed up the DOJ’s actions.
Coinbase takes allegations of improper use of company information very seriously, as demonstrated by our rapid investigation of this matter. Again, we have zero tolerance for this kind of misconduct and will not hesitate to take action against any employee when we find wrongdoing. We appreciate the DOJ’s recognition of our help in holding these individuals accountable.
Coinbase official statement
SEC calls 9 crypto’s `securities` in the insider trading case
The U.S. Securities and Exchange Commission used Thursday’s first insider-trading case to rule nine digital assets as “securities,” while outlining crypto regulation enforcement actions through standards.
The SEC made a highly unusual move by stating that nine of the cryptocurrencies listed were securities. The tokens listed were Flexa’s AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.
While the SEC has classified cryptocurrencies as securities in the past, it usually did so through enforcement actions or settlements with the issuer. But this Thursday’s complaint is the first time the SEC has characterized numerous cryptocurrencies as securities without charging either the issuer or the exchange that lists them.
According to an SEC source, the inquiry into the underlying insider trading case is still ongoing. The action was characterized as a “striking example of ‘regulation by enforcement'” by the Commodity Futures Trading Commission (CFTC) Commissioner Caroline Pham in a tweeted statement.
According to Coinbase, none of the cryptocurrencies it offers are securities. The firm highlighted a parallel Department of Justice action that “did not charge securities fraud.”
No assets listed on our platform are securities. The SEC charges are an unfortunate distraction from today’s appropriate law enforcement action.
Coinbase blog post
The SEC’s 62-page complaint went through each of the nine tokens one by one, demonstrating how they should be characterized under the Howey Test as securities. Coinbase separately submitted a petition with the SEC requesting that the agency begin a rulemaking procedure to clarify how it would apply federal securities rules to cryptocurrencies.
