SEC Charges Former Coinbase Manager for Crypto Asset Insider Trading

​The Securities and Exchange Commission(SEC) has charged against a former Coinbase product manager, his brother, and his friend for insider trading. They allegedly perpetrated a scheme to trade ahead of multiple announcements regarding certain crypto assets that would be made available for trading on the Coinbase platform. 

According to the SEC's complaint, Coinbase's public listing announcements, which shows what crypto assets or tokens would be made available for trading, is treated as confidential. The exchange has warned its staff not to trade based on, or notify others of, that information. 

However, Ishan Wahi, who helped to coordinate such announcements, violated its duties for repeatedly tipping the timing and content of upcoming listing announcements to his brother, Nikhil Wahi, and his friend, Sameer Ramani from at least June 2021 to April 2022. 

Specifically, Nikhil and Sameer allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements to gain profit. As a result, the illicit profits they obtained from the long-running insider trading scheme totaled more than $1.1 million.

The SEC files a lawsuit in federal district court in Seattle, Washington against Ishan, Nikhil, and Sameer for violating the antifraud provisions of the securities laws and seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties.

In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against all three individuals on Thursday.

"We are not concerned with labels, but rather the economic realities of an offering," said Gurbir S. Grewal, Director of the SEC's Division of Enforcement. "In this case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase. Rest assured, we'll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved."

"In nearly a year, the defendants collectively earned over $1.1 million in illegal profits by engaging in an alleged insider trading scheme that repeatedly used material, nonpublic information to trade ahead of Coinbase listing announcements," said Carolyn M. Welshhans, Acting Chief of the Enforcement Division's Crypto Assets and Cyber Unit. "As today's case demonstrates, whether in equities, options, crypto assets, or other securities, we will vindicate our mission by identifying and combatting insider trading in securities wherever we see it.”

In the financial industry, it is not uncommon for employees in large enterprises to operate insider trading, which requires stricter supervision to eradicate. As Fazzaco recently reported, US arrested former Opensea NFT marketplace employee for 'first-ever digital asset insider trading scheme' last month. To resist such illegal operations, the BSEC (Bangladesh Securities and Exchange Commission)​ has issued a consultation proposing changes to its rules prohibiting insider trading in May.