US Attorney Damian Williams said: “Today’s charges are a further reminder that Web3 is not a lawless zone. Just last month, I announced the first insider trading case involving NFTs, and today I’m announcing the first insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it happens on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing crooks to justice wherever we find them.”
FBI Assistant Director Michael J. Driscoll said: “Although the allegations in this case relate to trades made on a crypto exchange – rather than a more traditional financial market – they still constitute insider trading. Allegedly, the defendants illegally traded in at least 25 different crypto assets and made illegal profits 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[1]:
Record
At all relevant times, Coinbase was one of the largest cryptocurrency exchanges in the world. Coinbase users could acquire, trade and sell various crypto assets through online user accounts with Coinbase. Periodically, Coinbase added new cryptoassets to those tradable through its exchange, and the market value of cryptoassets usually increased significantly after Coinbase announced that it would list a particular cryptoasset. Accordingly, Coinbase has kept this information strictly confidential and has prohibited its employees from sharing this information with others, including providing “advice” to any person who may trade based on this information.
Starting around October 2020, ISHAN WAHI worked at Coinbase as a product manager assigned to a Coinbase asset listing team. In this role, ISHAN WAHI was involved in the highly confidential listing process of cryptoassets on Coinbase’s exchanges and had detailed and advanced knowledge of the cryptoassets Coinbase planned to list and the timing of public announcements about those listings encryption. Beginning at least August 2021 and continuing through May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel intended 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 want to share with all of its employees.
The Person Trading Plan
On at least 14 occasions, beginning at least June 2021 and continuing through April 2022, ISHAN WAHI knew in advance that Coinbase planned to list certain crypto assets and the timing of Coinbase’s public announcements of those asset listings and misappropriated this Coinbase confidential information by bribing either his brother, NIKHIL WAHI, or ISHAN WAHI’s friend and associate, SAMEER RAMANI, so that they could profitably trade in these crypto assets prior to its public announcements Coinbase to enter.
After receiving advice from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced that it had introduced or was considering listing these cryptocurrencies on its exchanges. After the Coinbase IPO announcements, NIKHIL WAHI and RAMANI sold the crypto assets for a profit. Based on inside information provided by ISHAN WAHI, NIKHIL WAHI and RAMANI have been collectively trading just prior to at least 14 separate Coinbase public listing announcements involving at least 25 different crypto assets. As a result of the insider trading scheme, NIKHIL WAHI and RAMANI collectively generated realized and unrealized profits totaling at least approximately $1.5 million.
To hide their purchases of crypto assets prior to the 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 created and regularly used new Ethereum blockchain wallets with no prior transaction history in order to further conceal their involvement in the scheme.
ISHAN WAHI’S attempted escape from the United States
On April 11, 2022, Coinbase announced that it is considering listing dozens of crypto assets on its exchanges. Based on Coinbase’s confidential information provided by ISHAN WAHI, RAMANI induced several anonymous Ethereum blockchain wallets to buy large amounts of at least six of the cryptocurrencies that were to be included in Coinbase’s listing announcement on April 11, 2022.
Shortly after RAMANI was traded before Coinbase’s April 11, 2022 listing announcement, on April 12, 2022, a Twitter account well-known in the crypto community tweeted about an Ethereum blockchain wallet “bought hundreds of thousands of dollars in tokens that appear exclusively on the Coinbase Asset List Post approximately 24 hours prior to its publication.” The trading activity referred to in the April 12 tweet was the trading triggered 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 the appropriate authorities (possibly 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 regarding Coinbase’s asset listing process at Coinbase’s Seattle, Washington office on Monday, 16 May 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 interview at Coinbase. Before 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 regarding the Coinbase investigation and sent both a photo of the messages he had received on May 11, 2022, from director of security operations at Coinbase. . Before boarding the May 16, 2022 flight to India, ISHAN WAHI was stopped by law enforcement and not allowed to leave the country.
ISHAN WAHI, 32, of Seattle, Washington, is charged with two counts of conspiracy to defraud and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison. 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 in prison. 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 in prison. Statutory maximum sentences are set by Congress and are provided here for informational purposes only, as any sentencing of defendants will be determined by a judge. Mr. Williams praised the investigative work of the FBI. He also acknowledged the help of the Justice Department’s National Cryptocurrency Enforcement Task Force, as well as the Securities and Exchange Commission, which filed separate civil actions against the defendants today. Mr. Williams further thanked Coinbase Global, Inc. for her cooperation with the research. This case is being handled by the Office’s Capital and Commodity Fraud Task Force. Assistant United States Attorneys Noah Solowiejczyk and Nicolas Roos are prosecuting. The allegations in the indictment are merely accusations and defendants are presumed innocent unless and until proven guilty. [1] As the introductory phrase indicates, the entire text of the indictment and the description of the indictment set forth herein are allegations only, and each fact described should be treated as an allegation.
