Coinbase Is Ready To Challenge The SEC

What Happened

The Department of Justice (U.S. Attorney’s Office for the Southern District of New York) announced charges yesterday against Ishan Wahi, a former product manager at Coinbase, his brother, Nikhil Wahi, and a friend, Sameer Ramani. They are accused of “wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in cryptocurrency assets by using confidential Coinbase information.” Specifically, the DOJ charged that the individuals used confidential non-public Coinbase information about cryptocurrency assets to be listed on Coinbase’s exchanges to front-run expected price jumps. The insider-trading scheme allegedly earned them more than $1.1 million in illicit gains.

The SEC also announced that it filed civil charges against the individuals over the alleged scheme. The civil charges allege that Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then sold them shortly after the announcements for a profit. The nine assets mentioned in the SEC complaint include AMP (AMP), Rally (RLY), DerivaDEX (DDX), XYO (XYO), Rari Governance Token (RGT), LCX (LCX), Powerledger (POWR), DFX Finance (DFX), and Kromatika (KROM). According to Coinbase, 7 of the 9 mentioned assets are listed on Coinbase’s platform.

Ishan Wahi attempted to flee to India ahead of a scheduled interview by Coinbase’s security department, but he was prevented by law enforcement from leaving. Ishan Wahi and Nikhil Wahi were arrested on Thursday morning in Seattle, and Ramani remains at large.

Key Actors

• DOJ
• SEC
• Coinbase
• Ishan Wahi
• Nikhil Wahi
• Sameer Ramani

Key Context

This is not the first time that Coinbase’s employees have been accused of insider trading. Many in the industry have long pointed out that Coinbase’s API leaked information regarding future listings on Coinbase. In April 2022, Coinbase confirmed they received reports of people appearing to buy certain assets right before they announced they’d be listed on Coinbase, allowing them to benefit from price movements that sometimes accompany its listing announcements.

This also isn’t the first time the DOJ has charged a former employee of a crypto related company with insider trading. On June 1, 2022 the DOJ announced charges against Nathaniel Chastain, a former product manager at Ozone Networks, Inc. d/b/a OpenSea (“OpenSea”), with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens, or “NFTs,” by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain.

Yesterday’s announcement serves as another reminder that traditional financial rules apply to the cryptocurrency industry and as the popularity of cryptocurrency and NFTs has…