Coinbase Exec's Brother Pleads Guilty In Crypto Insider Trading Case

Nikhil Wahi, brother of former Coinbase product manager Ishan Wahi, pleaded guilty in a Monday hearing to one count of conspiracy to commit wire fraud in connection with an alleged insider trading scheme. Decrypt reports: "Less than two months after he was charged, Nikhil Wahi admitted in court today that he traded in crypto assets based on Coinbase's confidential business information to which he was not entitled," said Damien Williams of the U.S. Attorney's Office in New York in a statement. "For the first time ever, a defendant has admitted his guilt in an insider trading case involving the cryptocurrency markets," Williams continued. "Today's guilty plea should serve as a reminder to those who participate in the cryptocurrency markets that the Southern District of New York will continue to steadfastly police frauds of all stripes and will adapt as technology evolves."

Nikhil now awaits sentencing in December, which could mean up to 20 years in prison. He has also been ordered to give back the money earned as a result of the illicit Coinbase trading, Williams said. Back in July, the Justice Department charged Ishan, Nikhil, and their friend Sameer Ramani with wire fraud conspiracy and wire fraud as it relates to cryptocurrency insider trading. The Securities and Exchange Commission also filed charges against the trio. While he was working at Coinbase, Ishan allegedly shared his insider knowledge of upcoming Coinbase listing announcements with Nikhil and Sameer to then profit from the listings by purchasing the tokens before they went live on Coinbase. In August, Ishan pled not guilty to the DOJ's charges. Now that his brother has pleaded guilty, it's unclear how Ishan's case will proceed and whether he will continue to fight the insider trading case.

According to the DOJ's statement released Monday, Nikhil implicated his brother Ishan and admitted to receiving tips from him. Nikhil then reportedly used numerous different crypto wallets in others' names to anonymize his insider trading. Concerns of insider trading at cryptocurrency exchanges extend beyond just this case, which is considered the first of its kind and is likely to set a precedent. Three Australian finance academics have posited that up to 25% of Coinbase listings in the past four years may have involved some insider trading.

Insider, how?

[Anonymous Coward]

According to the government (well, the IRS anyway and that's who you pay) cryptocurrencies are property. They are not currency or related to any real financial instrument and therefore not securities either.

Saying this is insider trading is like saying you tipped someone off that you were going to list a bunch of items on eBay for sale. Is that insider trading?

The whole space is messed up. The government needs to come up with a unified idea of what cryptocurrency is. Right now they're just making up rules a

Re:

[NicknameUnavailable]

Bruh, what were they chatting about? A new doge meme? Shitcoins have no insider knowledge to them.

Re: Insider, how?

[St.Creed]

Either you have no clue about the coins or you're wilfully ignorant. It's hard to tell.

But for the rest: the listing of the coins on Coinbase always provided an influx of cash into the new coins. This would boost the price, obviously. Knowing this in advance is insider trading.

The defense could argue its not because cryptocoins aren't stocks, but the law could be defined broader. IANAL.

Re:

[NicknameUnavailable]

But for the rest: the listing of the coins on Coinbase always provided an influx of cash into the new coins. This would boost the price, obviously. Knowing this in advance is insider trading.

Thanks, saved me reading TFA.

Re:

[tekram]

Perhaps SEC's definition of insider trading will help - know that cryptocurrency has now been deemed a security regardless of whether it is currency or property and is regulated as security - here is the definition: 'Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security.'

Re:Insider, how?

[raymorris]

Many cryptocoin are securities. Some are arguably securities. Where someone says the are launching a crypto coin in order to raise money from some business venture, and suggest that success of the business venture will cause the value of the coins to rise, that's DEFINITELY a security. That's just a stock, wrapped inside a scam-flavored flatbread.

Quoting SCOTUS in 1946:
--
  The test of whether there is an "investment contract" under the Securities Act is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others; and, if that test be satisfied, it is immaterial whether the enterprise is speculative or nonspeculative, or whether there is a sale of property with or without intrinsic value. P. 328 U. S. 301.
--

Also, quoting Damian Williams, the US Attorney, âoeFraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.â

18 U.S. Code  1341 defines fraud:
--
having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises ...
to sell, dispose of, loan, exchange, alter, give away ...
any article ...
shall be fined under this title or imprisoned not more than 20 years, or both.
--

If you to sell or exchange any item, as part of a scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, that's fraud.

Crypto is a scam

[Moryath]

... and it always has been. Why are we surprised now?

Re:

[Antique Geekmeister]

The details of the crime matter to those who are robbed. The extent and frequency may not be a surprise, but can be newsworthy simply for confirming suspicions.

Re: Crypto is a scam

[abies]

But topic in question is metascam. If you compare crypto to selling you a car which is supposed to run infinitely on just air, no gas (only to later learn it doesn't work at all), these guys are robbing the transport full of those cars, stealing them and reselling on black market for a double price.

Re:

[dmtkymts]

I like this article very much. The content was good. If any of the business person are looking for a website development company, I found this site and they are providing the best service to the business person regarding the website development company.. [slashdot.org]

Crypto

[f7145ch0]

http://newssia.com/ [newssia.com]

Amount?

[backslashdot]

How much did he make off this?

Good. Politicians next ?

[sir_smashalot_3rd]

Since there is a whole lot of insider trading going on there.