US charges ex-Coinbase exec in first crypto insider trading case

NEW YORK, July 21 (Reuters) – A former chief product officer at Coinbase Global and two others have been charged with wire fraud in the first insider trading case involving a cryptocurrency, U.S. prosecutors in Manhattan said on Thursday. .

Ishan Wahi, the chief product officer of the cryptocurrency exchange, and his brother Nikhil Wahi were arrested Thursday in Seattle.

They and a third defendant, their friend Sameer Ramani, also face civil charges related to the US Securities and Exchange Commission. Ramani is on the run.

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In a statement, lawyers for Ishan Wahi, 32, said he was “innocent of any wrongdoing and intends to defend himself vigorously”. A lawyer for Nikhil Wahi did not immediately respond to requests for comment. Reuters could not immediately identify a lawyer for Ramani.

Prosecutors said Ishan Wahi shared confidential information about upcoming announcements of new cryptocurrency assets that Coinbase would allow users to trade through its exchange.

They also said that Ishan Wahi purchased a one-way plane ticket to India after a Coinbase security manager summoned him to the company’s Seattle office for a meeting. Law enforcement barred him from boarding the May 16 flight, prosecutors said.

In Ishan Wahi’s initial appearance in federal court in Seattle, bail was set at $1 million and he was ordered to surrender his passports. Prosecutors did not demand that he be detained despite his alleged attempt to flee. His next appearance in federal court is on August 2 in Manhattan.

In related civil charges, the SEC alleged that Nikhil Wahi, 26, and Ramani, 33, bought and sold at least 25 crypto assets for profit, including nine that the agency said it identified as securities. .

An SEC official said its investigation is ongoing and declined to say whether it would pursue action against Coinbase for listing the tokens considered securities in the complaint.

Wahi and Ramani allegedly used Ethereum blockchain wallets to acquire the assets and traded at least 14 times before the June 2021 and April 2022 Coinbase announcements, generating at least $1.5 million in illicit gains, prosecutors said.

“Fraud is fraud is fraud, whether it happens on the blockchain or on Wall Street,” Damian Williams, the U.S. Attorney in Manhattan, said in a statement.

Coinbase chief security officer Philip Martin said the company shared with prosecutors the findings of an internal investigation into the trade.

“We are committed to doing our part to ensure that all market participants have access to the same information,” Martin wrote on Twitter.

In a blog post, Coinbase acknowledged that the SEC separately filed securities fraud charges against Ishan and Nikhil Wahi, as well as Ramani, but noted that federal prosecutors did not charge securities fraud.

“No asset listed on our platform is a security, and the SEC charges are an unfortunate distraction from today’s proper enforcement action,” the blog post reads.

Last month, federal prosecutors in Manhattan charged a former chief product officer at OpenSea, the largest online non-fungible token marketplace, with insider trading in what prosecutors described as the first such case involving digital assets. Read more

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Reporting by Jonathan Stempel and Luc Cohen in New York and Hannah Lang in Washington; Editing by Mark Porter, Andrea Ricci, Frances Kerry and David Gregorio

Our standards: The Thomson Reuters Trust Principles.

Lance B. Holton