Coinbase manager caught for insider trading
Although the cryptocurrency market is not a traditional financial trading market, it is still possible to profit from insider trading, in fact, due to the particularity of the currency circle, it is difficult to strictly control the insider trading of currency exchanges by traditional regulatory means. Previously, many well-known exchanges have been reported to have a problem. But unless they are caught, the exchange will never admit it, especially non-listed companies are even less likely to self-examine and disclose this information.
“The Coinbase team at their stand.” by CoinDesk is licensed under CC BY-NC-ND 2.0
Coinbase, the largest exchange in the United States, is an exception. Because this is a listed company, it is impossible to expect them to conduct a self-examination. Coinbase launched an internal investigation after investors and netizens found clues on the blockchain.
A former Coinbase manager (Ishan Wahi) and two associates (Nikhil Wahi and Sameer Ramani) have been charged with wire fraud and insider trading in crypto assets, according to information released by the U.S. Department of Justice. This is the first cryptocurrency-related insider trading case in litigation history.
Ishan Wahi works as a Coinbase product manager, using new cryptocurrencies that Coinbase lists from time to time to buy and sell in advance. The principle is actually very simple. Every time a new cryptocurrency is listed on Coinbase, the cryptocurrency will inevitably skyrocket. It is very common for the increase to be as little as 10% and more than 70-80%. The product manager himself knows which new cryptocurrencies are going to be listed, and only needs to ask two associates to buy them in the market in advance, and then sell them after the price skyrockets.
Of course, he also knew that this was illegal and that he might be investigated, so the three-man gang used a variety of methods to hide the traces of the transaction, such as through some coin mixers. This lasted from October 2020 until April 2022, when a massive and suspiciously well-timed purchase by Ramani was exposed on Twitter, triggering an investigation within Coinbase.
“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,” commented FBI’s Assistant Director, Michael J. Driscoll.
“As alleged, the defendants made illegal trades in at least 25 different crypto assets and realized ill-gotten gains totaling approximately $1.5 million.”
All three defendants now face charges that could incur up to 20 years of imprisonment, which is to be decided in the U.S. District Court of the Southern District of New York.
