Three Charged in First Cryptocurrency Insider Trading Scheme

ACFE Community Manager

Rihonna Scoggins

The U.S. Department of Justice (DOJ) has brought insider trading charges against Ishan Wahi, a former Coinbase product manager, his brother Nikhil Wahi and friend Sameer Ramani after they allegedly made profits of more than $1 million by buying crypto assets before their listings on the exchange. According to the DOJ, Ishan leaked confidential information regarding assets to be listed on Coinbase as well as the time of the listing’s public announcement to Nikhil and Ramani on at least 14 occasions between June 2021 and April 2022. 

In a separate but related case, the Securities and Exchange Commission (SEC) said it also brought charges against Coinbase and its co-founders for allegedly making false statements to the agency during its investigation. 

According to the Department of Justice, Ishan Agarwal and Ramani Navin purchased assets shortly before the Coinbase listing announcements using anonymous Ethereum wallets and centralized exchange accounts held in the name of others. The DOJ says the duo earned approximately $1.5 million through such trades involving at least 25 different assets. 

The SEC alleges the defendants’ insider trading scheme violated Section 10(b) of the Securities Exchange Act (15 U.S.C. § 78j(b)), which prohibits fraudulent conduct in connection with the purchase or sale of securities, and Rule 10b-5 (17 C.F.R. § 240.10b-5), which prohibits materially deceptive or fraudulent conduct in connection with the purchase or sale of securities. 

The SEC has charged Nikhil Wahi and Sameer Ramani with using inside information to trade in crypto assets ahead of more than 10 cryptocurrency-related announcements, including nine that were securities under U.S. law and 16 that were not. The SEC has not explained why 16 of these did not constitute securities under U.S. law. This leaves open the possibility that they were regulated by foreign jurisdictions where some crypto assets may be considered legal tender or utility tokens exempt from securities regulations under local laws governing their use cases within those territories. 

The United States District Court for the Southern District of New York filed criminal charges against the Wahi brother and Sameer Ramani for the same conduct it did not allege was securities fraud. The Southern District indictment contains four wire fraud counts in violation of Title 18, United States Code, Section 1343: (1) conspiracy to commit wire fraud against Wahi and his brother; (2) a separate conspiracy to commit wire fraud against Wahi and his friend; (3) a substantive count of wire fraud against Wahi and his brother; and (4) a substantive count of wire fraud against Wahi and his friend. 

As of now, there is no set court date.