The Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) have filed charges against a former Coinbase manager over allegations of wire fraud and insider trading for cryptocurrency trading.
This was outlined by the aforementioned entities in statements published today, which formally accuse Ishan Wahi, former product manager for Coinbase, of sharing information about the crypto assets that the exchange would proceed to list with his brother, Nikhil Wahi, and another known named Sameer Ramani, who took advantage of this data to invest before the corresponding announcement took place.
Among other details, the DOJ indicates that Wahi revealed information about at least 14 assets that would be listed on Coinbase, after which the other defendants used anonymous Ethereum -based wallets and accounts on the exchange in other people's names to acquire the cryptocurrencies at a low cost. According to reports, those involved made between USD $1.1 million – 1.5 million with this knowledge in their possession.
Regarding the cryptocurrencies traded, Wahi and Ramani carried out commercial operations with tokens such as TRIBE, ALCX, XYO, GALA, ENS, POWR, and many others.
Going back to the indictment filed by the DOJ, the agency cited a tweet posted by Twitter user @Cobie, which identified an Ethereum address that purchased significant amounts of USD worth of the aforementioned tokens some 24 hours before they were listed on Coinbase.
This data, added to other transactions recorded on the Blockchain, made it possible to detect the use of privileged information so that the accused acquired the cryptocurrencies ahead of time and derived considerable profits. Once aware of what had happened, the authorities intensified their efforts to find those responsible.
Regarding what happened, the federal prosecutor for the Southern District of New York, Damian Williams, commented:
"Today I am announcing the first insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it happens 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 find them."
After knowing what happened, Ishan Wahi was arrested today in the morning. However, suspicions prevented the accused from fleeing the country in May of this year, just as he had contemplated when he planned to board a plane to India.
We are not quite sure how this would affect Coinbase stock in the short term.
Cryptocurrency companies might soon be exempt from certain securities laws in the United States according to SEC Chairman Gary Gensler. This would allow them to operate without much regulation, which has been somewhat controversial among investors. He believes this will encourage more crypto companies to comply with regulations.
Gensler said there were several cryptocurrency companies operating outside of compliance standards, but he didn't name any specific names.
"There is a potential way forward. I've told the industry, the lending platforms, the trading platforms, 'Come on, talk to us.'"