US files its first criminal charges over insider trading of cryptocurrency

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American authorities are continuing to crack down against insider trading of digital assets. The New York Times reports that federal prosecutors in New York City have charged three people with wire fraud relating to an insider trading scheme for cryptocurrency, including former Coinbase exchange employee Ishan Wahi. This is the first time officials have levelled charges relating to insider trading of digital currency, according to Southern District of New York attorney Damian Williams.

As with a companion civil case from the Securities and Exchange Commission, prosecutors allege Wahi shared confidential information about future asset listings with his brother Nikhil Wahi and his brother’s friend Sammer Ramani. The data, shared between “at least” June 2021 and April 2022, helped Nikhil and his friend buy assets before the listing boosted their value. The two would then sell their assets for a profit. The purchases of 25 or more assets netted a profit of more than $1.1 million, according to the SEC.

Coinbase started an internal investigation in April in response to a Twitter post about unusual trading activity. Ishan Wahi booked a flight to India right before Coinbase was set to interview him, but he and his brother were arrested in Seattle this morning. Ramani is still at large and believed to be in India, the SEC said.

Wahi’s lawyers maintained their client’s innocence, and said he would “vigorously” defend against the charges. Ramani and the attorney for Wahi’s brother haven’t commented on the charges. Coinbase said it had turned over information to the Justice Department and had fired Wahi as part of a “zero tolerance” policy for this behavior.

This is far from the largest crypto case. Lending firm BlockFi recently paid $100 million to settle securities violations, while Telegram had to return $1.2 billion to investors for its own violations on top of paying $18.5 million. However, the charges are intended more to send a warning. The government wants to make clear that fraud is illegal whether it’s “on the blockchain or on Wall Street,” as Williams explained to The Times. This is as much about discouraging would-be crooks as it is punishment for the defenders.

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