The former Coinbase manager and two co-conspirators have been charged by the U.S. Department of Justice with wire fraud conspiracy and scheme to commit insider trading in cryptocurrency assets.
This is the first case of its kind in history and a signal that those involved in cryptocurrency and NFT fraud will be targeted by law enforcement.
Coinbase, an American cryptocurrency exchange platform, has almost 90 million registered users and a revenue of $7.84 billion (2021).
Coinbase periodically adds new crypto assets onto its platform to provide new investment opportunities.
The value of these coins and tokens typically increases when a large platform like Coinbase makes them available for purchase.
Defendant Ishan Wahi, who worked as a product manager at Coinbase, is accused of abusing his position and insider knowledge to make crypto investments that were almost certain to rise in price.
Michael J. Driscoll, the FBI’s Assistant Director, said “although the allegations in this case relate to transactions made in a crypto exchange – rather than a more traditional financial market – they still constitute insider trading.”
“As alleged, the defendants made illegal trades in at least 25 different crypto assets and realised ill-gotten gains totaling approximately $1.5 million.”
Ishan Wahi knew when Coinbase was planning to add new cryptocurrency assets before the company announced it publicly.
The group purchased 25 crypto assets based on insider info from 14 new asset listing announcements disclosed from Coinbase to Ishan Wahi under confidentiality terms.
The indictment mentions numerous transfers on a wide range of crypto accounts, whereby assets were passed through anonymous Ethereum blockchain wallets and even held in other people’s names.
The campaign took place between October 2020 until April 2022.
U.S. Attorney Damian Williams said: “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.”
All three defendants now face charges that could mean 20 years of imprisonment, to be decided in the U.S. District Court of the Southern District of New York.