NEW YORK – A former Coinbase product manager and his brother, along with a Houston man, were charged Thursday in what federal authorities described as the U.S. government’s first cryptocurrency insider trading case. .
The brothers, Ishan Wahi and Nikhil Wahi, were arrested while Houston man Sameer Ramani remained at large, federal authorities said as they announced the opening of an indictment in federal court in Manhattan.
Authorities said Ishan Wahi, 32, was a product manager at Seattle-based Coinbase Global Inc., one of the world’s largest cryptocurrency exchanges, when he provided advice to 26-year-old Nikhil Wahi and his friend, Ramani, 33. All three were charged with wire fraud conspiracy and wire fraud.
The indictment says that Ishan Wahi was detained by law enforcement before boarding a flight to India on May 16 and prevented from leaving the country. In the hours before the flight, he phoned and texted his brother and Ramani to alert them to an investigation Coinbase was conducting, according to a statement.
Ishan Wahi purchased a one-way plane ticket to India in a “failed attempt to flee the United States” after agreeing to be interviewed by Coinbase for an internal investigation, according to the indictment.
Federal prosecutor Damian Williams said the indictment represents the first government insider trading case involving cryptocurrency markets. He said it was a reminder that cryptocurrency markets are not a law-free zone.
Michael Driscoll, the head of the FBI’s New York office, said the defendants raised around $1.5 million in illegal profits by trading at least 25 different crypto assets.
Lawyers representing Ishan Wahi said in an email to The Associated Press that their client is innocent and “intends to vigorously defend himself against these charges and in SEC action.”
Messages seeking comment were sent to other defense attorneys.
The Securities and Exchange Commission filed civil insider trading charges against the men in federal court in Seattle.
The SEC said charges were brought against the trio after they carried out a plan to trade ahead of multiple announcements about certain crypto assets that were going to be available for trading on the Coinbase platform.
“As today’s case demonstrates, whether in stocks, options, crypto assets or other securities, we will uphold our mission by identifying and combating securities insider trading wherever we see it,” said Carolyn M. Welshhans, acting head of the Compliance Division. Cryptoactive and Cybernetics Unit.
The New York indictment says Ishan Wahi began working as a product manager on the asset listing team in October 2020. He said he provided advice on sensitive information to his brother and friend from June 2021 to last April.
Brian Armstrong, the chief executive officer of Coinbase, said on Twitter and in a blog post on Thursday that the company began an internal investigation in April “into the possible initial execution of assets shortly before listing on Coinbase.”
The indictment says the leader was publicly identified by a Twitter post in April on an account “that is well known in the crypto community, with hundreds of thousands of followers.”
Armstrong said the company gathered enough evidence and then fired Ishan Wahi and sent its findings on the three men to the Justice Department.
He added: “We will investigate and refer the bad guys to law enforcement, and they will face real legal consequences, including jail time.”