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. SEC charged them on the heels of a slew of high-profile bitcoin fraud cases and unprecedented crypto insider trading tipping schemes. 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.
U.S. Attorney Damian Williams of the Southern District of NYC 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. 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
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.
SEC used Thursday’s first insider-trading case to rule nine digital assets as “securities,” while outlining crypto regulation enforcement actions through standards. The tokens listed were Flexa’s AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM. While the SEC has classified cryptos 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 cryptos as securities without charging either the issuer or the exchange that lists them.
According to Coinbase, none of the cryptos it offers are securities. The firm highlighted a parallel DOJ 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." 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 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.