Brother of Ex-Coinbase Manager Pleads Guilty in First Crypto Insider Trading Case
Top line
A defendant in the first-ever cryptocurrency insider trading case pleaded guilty to a wire fraud conspiracy charge Monday and faces between 10 and 16 months in prison, in a historic plea that will set a strong precedent for how the federal government can regulate the industry.
A former coinbase product manager is at the center of crypto’s first insider trading case.
Keywords
Nikhil Wahi, the brother of former Coinbase product manager Ishan Wahi, filed the claim in New York federal court, according to Reuters and Law360.
The Securities and Exchange Commission announced insider trading charges against the brothers and a third associate Sameer Ramani in July, alleging the three generated $1.1 million in profits using the scheme, and the Justice Department charged the three men with wire fraud conspiracy and wire fraud.
Nikhil Wahi admitted in court Monday that he executed trades based on non-public information about which cryptocurrencies Coinbase planned to list next, Law360 reports, and will be sentenced on December 13.
Ishan Wahi plans to fight his charges on the grounds that cryptocurrency assets are not securities and therefore do not face insider trading laws, according to Law360, although prosecutor Noah Solowiejczyk noted Monday that the wire fraud conspiracy charge does not rest on the case (Justice) . The department did not impose charges for securities fraud).
Decisive quote
““While I did not believe cryptocurrency was a security, I knew it was wrong to receive Coinbase’s confidential information and make trading decisions based on that confidential information,” Wahi said at the hearing.
Key background
After years of federal regulators figuring out how to govern the cryptocurrency industry, the landmark charges in July indicated a clear stance by the SEC that some cryptocurrency assets do indeed qualify as securities. In a blog post, Coinbase CEO Brian disputed the characterization, saying writing the insider trading allegations was an “unfortunate distraction” from the investigation into Wahis and Ramani that the company was fully pursuing.
Tangent
Coinbase shares are down 67.2% year-to-date, coinciding with an industry-wide collapse and a 53% decline in the price of bitcoin. Both assets have rallied recently, with bitcoin up 11% in September and Coinbase shares up 25% in the period.
Further reading
Ex-Coinbase Manager, Two Others Indicted in Alleged $1.1 Million Crypto Insider Trading Scheme (Forbes)
Ex-Coinbase Workers Brother Cops To Crypto Insider Trading (Law360)
Gotta catch ’em all? SEC Brings First Crypto Insider Trading Action (JD Supra)
