Three charged in first-ever cryptocurrency insider trading tipping scheme | USAO-SDNY

Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Deputy Director in Charge of the Federal Bureau of Investigation’s (“FBI”) New York Field Office, today announced the lifting of seals. of an Indictment accusing ISHAN WAHI, former chief product officer at Coinbase Global, Inc. (“Coinbase”), NIKHIL WAHI and SAMEER RAMANI, with wire fraud conspiracy and wire fraud in connection with a scheme to engage in insider trading in crypto-assets currency using Coinbase confidential information about crypto assets should be listed on Coinbase exchanges. ISHAN WAHI and NIKHIL WAHI were arrested this morning in Seattle, Washington and will appear in United States 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 charges are yet another reminder that Web3 is not a lawless zone. Last month, I announced the first ever case of insider trading involving NFTs, and today I am announcing the first ever case of insider trading involving cryptocurrency markets. Our message with these accusations 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 fraudsters to justice, wherever we may find them.

FBI Deputy Director Michael J. Driscoll said, “While the allegations in this case relate to transactions made on a crypto exchange — rather than a more traditional financial market — they still constitute insider trading. As alleged, the defendants carried out 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, whether “old” or “new.”

As alleged in the indictment unsealed 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 its exchange, and the market value of crypto assets usually increased significantly after Coinbase announced that it would list a particular crypto asset. Accordingly, Coinbase has kept this information strictly confidential and has prohibited its employees from sharing this information with others, including providing a “tip” to anyone 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 process of listing crypto assets on Coinbase exchanges and had detailed and advanced knowledge of the crypto assets Coinbase planned to list and the timing of public announcements regarding these listings. crypto assets. Since at least August 2021 and until May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel restricted to a small number of Coinbase employees directly involved in the Coinbase asset listing process. The private channel was used to discuss, among other things, “exact announcements/launch dates + timelines” which Coinbase declined 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 both that Coinbase planned to list particular crypto assets and the timing of Coinbase’s public announcements regarding those asset lists and misappropriated this confidential information from Coinbase by tipping. either his brother, NIKHIL WAHI, or ISHAN WAHI’s friend and associate, SAMEER RAMANI, so that they can make profitable trades in these crypto assets ahead of Coinbase’s public announcements.

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 was listing or considering listing these crypto assets on its trades. Following Coinbase’s public listing announcements, NIKHIL WAHI and RAMANI sold the crypto assets at a profit. Based on confidential information provided by ISHAN WAHI, NIKHIL WAHI, and RAMANI collectively shortly before traded 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 gains totaling at least approximately $1.5 million.

To conceal their purchases of crypto assets ahead of Coinbase listing announcements, NIKHIL WAHI and RAMANI used accounts on centralized exchanges held in the names of others, and transferred funds, crypto assets, and the proceeds of their scheme via several 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 that it was considering listing potentially dozens of crypto assets on its exchanges. Based on confidential Coinbase information provided by ISHAN WAHI, RAMANI tricked several anonymous Ethereum blockchain wallets into purchasing large amounts of at least six of the crypto assets that were to be included in Coinbase’s listing announcement on 11 April 2022.

Shortly after RAMANI’s exchange before Coinbase’s April 11 listing announcement, on April 12, 2022, a well-known Twitter account in the crypto community tweeted about an Ethereum blockchain wallet “that bought hundreds of thousands of dollars worth of tokens exclusively featured in the Coinbase Asset List release approximately 24 hours prior to its release.The trading activity referenced in the April 12 tweet was trade caused by RAMANI.Coinbase subsequently responded publicly on Twitter noting that he had already begun to investigate the matter and a few weeks later said in a public blog post that any Coinbase employee who leaked confidential company information would be “immediately fired and referred to proper authorities (potentially for criminal prosecution).”

On May 11, 2022, Coinbase’s Director of Security Operations emailed ISHAN WAHI to inform him that he should attend an in-person meeting regarding Coinbase’s asset registration process at the office of Coinbase in Seattle, Washington on Monday, May 16, 2022. ISHAN WAHI has confirmed he will be attending the meeting.

On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a one-way flight to India which was to depart the next day shortly before ISHAN WAHI was supposed to be interviewed by Coinbase. Before boarding the flight, ISHAN WAHI falsely told Coinbase employees that he had already left for India when he had not. In the hours between booking the flight and its scheduled departure, ISHAN WAHI called and texted NIKHIL WAHI and RAMANI about the Coinbase investigation, and sent them both a picture of the messages he had received on May 11, 2022 from the Chief Security Officer of Coinbase. . Before boarding the May 16, 2022 flight to India, ISHAN WAHI was arrested 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 carrying 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 carrying 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 carrying a maximum sentence of 20 years.

The maximum legal penalties are prescribed 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 FBI’s investigative work. 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 filed civil lawsuits against the defendants today. Mr. Williams also thanked Coinbase Global, Inc. for its cooperation with the investigation.

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

The allegations contained in the indictment are only accusations and the defendants are presumed innocent until proven guilty.


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


Source link

Back To Top