Three Charged in First-Ever Cryptocurrency Insider Trading Tipping Scheme | USAO-SDNY

Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the deputy director-in-charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), made today announced the unsealing. of a charge against ISHAN WAHI, a former product manager at Coinbase Global, Inc. (“Coinbase”), NIKHIL WAHI and SAMEER RAMANI, conspiracy to commit wire transfer fraud and wire transfer fraud in connection with a plan to engage in insider trading of cryptocurrency assets using confidential Coinbase information about which crypto assets were planned to to be listed on Coinbase’s exchanges. ISHAN WAHI and NIKHIL WAHI were arrested this morning in Seattle, Washington and will appear in US District Court for the Western District of Washington today. SAMEER RAMANI was also charged today and remains free.

US Attorney Damian Williams said: “Today’s indictments are a further reminder that Web3 is not a law-free zone. Last month I announced the very first insider trading case involving NFTs, and today I’m announcing the very first insider trading case involving cryptocurrency markets. Our message with these allegations is clear: fraud is fraud is fraud, whether 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.”

FBI Assistant Director Michael J. Driscoll said, “While the allegations in this case relate to transactions made in a crypto exchange – rather than in a more traditional financial market – they still constitute insider trading. alleged the defendants made illegal transactions in at least 25 different crypto assets and made ill-gotten gains totaling approximately $1.5 million.Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets – both ‘old’ and ‘new’.”

As alleged in the indictment disclosed in Manhattan Federal Court[1]:

Background

At all relevant times, Coinbase was one of the largest cryptocurrency exchanges in the world. Coinbase users can acquire, trade and sell various crypto assets through online user accounts with Coinbase. Periodically, Coinbase added new crypto assets to those that could be traded through the exchange, and the market value of crypto assets typically increased significantly after Coinbase announced it would list a particular crypto asset. Accordingly, Coinbase kept such information in the strictest confidence and prohibited its employees from sharing that information with others, including by providing a “tip” to individuals who might act on that information.

From about October 2020, ISHAN WAHI worked at Coinbase as a product manager assigned to a Coinbase activation team. In that role, ISHAN WAHI was involved in the highly confidential process of listing crypto assets on Coinbase’s exchanges and had detailed and advanced knowledge of what crypto assets Coinbase intended to list and the timing of public announcements about that crypto. asset lists. In any case, ISHAN WAHI started in August 2021 and continued until May 2022. ISHAN WAHI was a member of a Coinbase private messaging channel reserved for a small number of Coinbase employees with direct involvement in the Coinbase activation process. The private channel was used to discuss, among other things, “exact announcement/launch dates + timelines” that Coinbase did not want to share with all of its employees.

The Insider Trading System

On at least 14 occasions, beginning at least June 2021 and continuing through April 2022, ISHAN WAHI knew in advance that Coinbase intended to list certain crypto assets and the timing of Coinbase’s public announcements of those asset listings and that confidential information from Coinbase had embezzled by tipping. either his brother, NIKHIL WAHI, or ISHAN WAHI’s friend and collaborator, SAMEER RAMANI, so that they could place profitable trades in those crypto assets ahead of Coinbase’s public listing announcements.

After getting tips from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced that it was listing or considering listing these crypto assets on its exchanges. Following Coinbase’s public listing announcements, NIKHIL WAHI and RAMANI sold the crypto assets for a profit. Based on confidential information provided by ISHAN WAHI, NIKHIL WAHI and RAMANI traded jointly shortly before at least 14 separate announcements of Coinbase’s public listing related to at least 25 different crypto assets. As a result of the insider trading, NIKHIL WAHI and RAMANI jointly generated realized and unrealized profits totaling at least approximately $1.5 million.

To hide their crypto asset purchases ahead of Coinbase listing announcements, NIKHIL WAHI and RAMANI used accounts on centralized exchanges held in the name of others, transferring funds, crypto assets and proceeds from their scheme through multiple anonymous Ethereum blockchain wallets. NIKHIL WAHI and RAMANI also regularly created and used new Ethereum blockchain wallets without any prior transaction history to further conceal their involvement in the scheme.

ISHAN WAHI’s attempt to flee the United States

On April 11, 2022, Coinbase announced it was considering listing potentially dozens of crypto assets on its exchanges. Based on Coinbase’s confidential information provided by ISHAN WAHI, RAMANI arranged for multiple anonymous Ethereum blockchain wallets to purchase large quantities of at least six of the crypto assets to be included in Coinbase’s April 11, 2022 announcement. .

Shortly after RAMANI traded ahead of Coinbase’s April 11 announcement, on April 12, 2022, a Twitter account well-known in the crypto community tweeted about an Ethereum blockchain wallet “which purchased hundreds of thousands of dollars worth of tokens exclusively in the Coinbase Asset.” Listing posts about 24 hours before it was published. The trading activity referenced in the April 12 tweet was the trading caused by RAMANI. Coinbase then responded publicly on Twitter, noting that it had already begun investigating the matter, and a few weeks later stated in a public blog post that any Coinbase employee who leaked confidential company information “would be immediately terminated and referred to relevant authorities ( possible for criminal prosecution) ).”

On May 11, 2022, Coinbase’s director of security operations emailed ISHAN WAHI to inform him that he is due to appear on Monday, May 16, 2022 for a face-to-face meeting regarding Coinbase’s asset listing process at Coinbase’s office in Seattle, Washington. . ISHAN WAHI confirmed this. he would attend the meeting.

On Sunday evening, May 15, 2022, ISHAN WAHI purchased a one-way flight to India departing the following day, shortly before ISHAN WAHI was due to be interviewed by Coinbase. Before boarding, ISHAN WAHI falsely told Coinbase employees that he had already left for India when he hadn’t. In the hours between the flight booking and its scheduled departure, ISHAN WAHI called and texted NIKHIL WAHI and RAMANI about Coinbase’s investigation, and sent both of them a photo of the messages he received on May 11, 2022 from Coinbase’s director of security operations. . Prior to boarding the May 16, 2022 flight to India, ISHAN WAHI was stopped by police and prohibited from leaving the country.

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ISHAN WAHI, 32, of Seattle, Washington, has been charged with two counts of conspiracy to commit telefraud and two counts of telefraud, each carrying a maximum sentence of 20 years.

NIKHIL WAHI, 26, of Seattle, Washington, is being charged with one count of conspiracy to involve telefraud and one count of telefraud, each carrying a maximum sentence of 20 years.

SAMEER RAMANI, 33, of Houston, Texas, is being charged with one count of conspiracy to commit telefraud and one count of telefraud, each carrying a maximum sentence of 20 years.

The legal maximum sentences are prescribed by Congress and are given here for informational purposes only, as any conviction of the defendants will be determined by a judge.

Mr. Williams praised the FBI’s investigative work. He also acknowledged the assistance of the Department of Justice’s National Cryptocurrency Enforcement Team, as well as that of the Securities and Exchange Commission, which today launched a separate civil suit against the defendants. Mr. Williams thanked Coinbase Global, Inc. for his cooperation in the investigation.

This case is being handled by the Bureau’s Securities and Commodities Fraud Task Force. United States Assistant Attorneys Noah Solowiejczyk and Nicolas Roos are leading the prosecution.

The charges in the Indictment are only accusations, and the accused are presumed innocent unless and until proven guilty.


[1] As the introductory sentence indicates, the entire text of the indictment and the description of the indictment set forth herein are only allegations, and any fact described is to be treated as an allegation.

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