Three Charged In First Ever Cryptocurrency Insider Trading Tipping Scheme
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging ISHAN WAHI, a former product manager at Coinbase Global, Inc. (“Coinbase”), NIKHIL WAHI, and SAMEER RAMANI, with wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in cryptocurrency assets by using confidential Coinbase information about which crypto assets were scheduled to be listed on Coinbase’s exchanges. ISHAN WAHI and NIKHIL WAHI were arrested this morning in Seattle, Washington and will be presented today in the United States District Court for the Western District of Washington. SAMEER RAMANI was also charged today and remains at large.
U.S. Attorney Damian Williams said: “Today’s charges are a further reminder that Web3 is not a law-free zone. Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs 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 may find them.”
FBI Assistant Director Michael J. Driscoll said: “Although the allegations in this case relate to transactions made in a crypto exchange – rather than a more traditional financial market – they still constitute insider trading. As alleged, the defendants made illegal trades in at least 25 different crypto assets and realized 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 unsealed in Manhattan federal court:
At all relevant times, Coinbase was one of the largest cryptocurrency exchanges in the world. Coinbase users could acquire, exchange, and sell various crypto assets through online user accounts with Coinbase. Periodically, Coinbase added new crypto assets to those that could be traded through its exchange, and the market value of crypto assets typically significantly increased after Coinbase announced that it would be listing a particular crypto asset. Accordingly, Coinbase kept such information strictly confidential and prohibited its employees from sharing that information with others, including by providing a “tip” to any person who might trade based on that information.
Beginning in approximately October 2020, ISHAN WAHI worked at Coinbase as a product manager assigned to a Coinbase asset listing 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 which crypto assets Coinbase was planning to list and the timing of public announcements about those crypto asset listings. Beginning at least in August 2021 and continuing through May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel reserved for a small number of Coinbase employees with direct involvement in the Coinbase asset listing process. The private channel was used to discuss, among other things, “exact announcement / launch dates + timelines” that Coinbase did not wish to share with all of its employees.
The Insider Trading Scheme
On at least 14 occasions beginning at least in June 2021 and continuing through April 2022, ISHAN WAHI knew in advance both that Coinbase planned to list particular crypto assets and the timing of Coinbase’s public announcements of those asset listings and misappropriated that Coinbase confidential information by tipping either his brother, NIKHIL WAHI, or ISHAN WAHI’s friend and associate, SAMEER RAMANI, so that they could place profitable trades in those crypto assets in advance 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 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 collectively traded shortly in advance of at least 14 separate Coinbase public listing announcements concerning at least 25 different crypto assets. As a result of the insider trading scheme, NIKHIL WAHI and RAMANI collectively generated realized and unrealized gains totaling at least approximately $1.5 million.
To conceal their purchases of crypto assets in advance of Coinbase listing announcements, NIKHIL WAHI and RAMANI used accounts at centralized exchanges held in the names of others, and transferred funds, crypto assets, and proceeds of 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 in order to further conceal their involvement in the scheme.
ISHAN WAHI’s Attempt to Flee the United States
On April 11, 2022, Coinbase announced that it was considering potentially listing dozens of crypto assets on its exchanges. Based on Coinbase confidential information provided by ISHAN WAHI, RAMANI caused multiple anonymous Ethereum blockchain wallets to purchase large quantities of at least six of the crypto assets that were to be included in Coinbase’s April 11, 2022 listing announcement.
Shortly after RAMANI traded in advance of Coinbase’s April 11 listing announcement, on April 12, 2022, a Twitter account that is well known in the crypto community tweeted regarding an Ethereum blockchain wallet “that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published.” The trading activity referenced in the April 12 tweet was the trading caused by RAMANI. Coinbase thereafter publicly replied 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 (potentially for criminal prosecution).”
On May 11, 2022, Coinbase’s director of security operations emailed ISHAN WAHI to inform him that he should appear for an in-person meeting relating to Coinbase’s asset listing process at Coinbase’s Seattle, Washington office on Monday, May 16, 2022. ISHAN WAHI confirmed he would attend the meeting.
On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a one-way flight to India that was scheduled to depart the next day shortly before ISHAN WAHI was supposed to be interviewed by Coinbase. Prior to boarding the flight, ISHAN WAHI falsely told Coinbase employees that he had already departed for India when he had not. In the hours between booking the flight and his scheduled departure, ISHAN WAHI called and texted NIKHIL WAHI and RAMANI about Coinbase’s investigation, and sent both of them a photograph of the messages he had 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 law enforcement and prevented from leaving the country.
* * *
ISHAN WAHI, 32, of Seattle, Washington, is charged with two counts of wire fraud conspiracy and two counts of wire fraud, each of which carries a maximum sentence of 20 years.
NIKHIL WAHI, 26, of Seattle, Washington, is charged with one count of wire fraud conspiracy and one count of wire fraud, each of which carries a maximum sentence of 20 years.
SAMEER RAMANI, 33, of Houston, Texas, is charged with one count of wire fraud conspiracy and one count of wire fraud, each of which carries a maximum sentence of 20 years.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Williams praised the investigative work of the FBI. He also acknowledged the assistance of the Justice Department’s National Cryptocurrency Enforcement Team, as well as that of the Securities and Exchange Commission, which separately initiated civil proceedings against the defendants today. Mr. Williams further thanked Coinbase Global, Inc. for its cooperation with the investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Noah Solowiejczyk and Nicolas Roos are in charge of the prosecution.
The allegations in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
#Charged #Cryptocurrency #Insider #Trading #Tipping #Scheme