The U.S. Department of Justice has once again demonstrated its strength and effectiveness of supervision. For the first time, it has arrested insider trading in the cryptocurrency industry. The full text of the insider trading of former Coinbase employees disclosed is like a blockbuster movie, and may become the subject of a Netflix movie. The crypto industry, where insider trading is rampant, not only causes the harvesting of retail investors, but also makes it a compliance obstacle similar to that of spot ETFs. In fact, exchanges such as Binance also have a lot of strict self-examination on insider trading. It is expected that in the future, there will be more and more criminal means involving insider trading, which will play an important role in purifying and complying with the industry.
US Department of Justice press release
U.S. Attorney Damian Williams for the Southern District of New York and Michael J. Driscoll, Assistant Director of the Federal Bureau of Investigation (FBI) New York Field Office, today announced the indictment of three charges against former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi and his friend Sameer Ramani Involved in alleged wire and mail fraud, as well as insider trading using confidential information on which crypto assets will be listed on the Coinbase exchange. Ishan Wahi and Nikhil Wahi were arrested this morning in Seattle, Washington, and will appear in U.S. District Court for the Western District of Washington today. Sameer Ramani was also charged today and has not been arrested.
U.S. Attorney Damian Williams said: “Today’s charges are a further reminder that Web3 is not an extrajudicial place. Just last month, we announced our first insider trading case involving NFTs, and today we announce our first involving cryptocurrency markets. of insider trading cases. Our message to these allegations is clear: Fraud is fraud, whether it happens on the blockchain or on Wall Street. The Southern District of New York will continue to work tirelessly to bring fraudsters to justice, wherever we are where to find them.”
FBI Assistant Director Michael J. Driscoll said: “Although the allegations in this case involve transactions on cryptocurrency exchanges rather than traditional financial markets, they still constitute insider trading. Defendants allegedly engaged in at least 25 different Illicit transactions were made in crypto assets and illicit gains totaling approximately $1.5 million were realized. Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets – “old” and “new” .”
As stated in the unsealed indictment in Manhattan federal court (the entire text of the indictment and the description of the indictment here constitutes only an allegation, and every fact described shall be deemed an allegation):
At the time of this case, Coinbase was one of the largest cryptocurrency exchanges in the world. Coinbase users can acquire, exchange and sell a variety of crypto assets through Coinbase’s online account. Coinbase also regularly adds new cryptoassets to the tradable asset class, and its market value typically increases significantly after Coinbase announces that it will add a particular cryptoasset. As such, Coinbase keeps such information strictly confidential and prohibits its employees from sharing that information with others, including providing “tips” to anyone who may transact based on that information.
Starting approximately October 2020, Ishan Wahi has worked at Coinbase as a Product Manager, subordinate to the Coinbase Asset Listing team. In this role, Ishan Wahi was involved in the highly confidential process of listing crypto assets on the Coinbase exchange and has a detailed and informed understanding of which crypto assets Coinbase plans to list and the timing of public announcements regarding the listing of these crypto assets. Starting at least August 2021 and continuing through May 2022, Ishan Wahi is a member of the Coinbase Private Channel for the few employees directly involved in the listing process of Coinbase assets. Private channels are used to discuss internal content such as Coinbase’s “exact announcement/release date + schedule”.
Insider Trading Scheme
Between June 2021 and April 2022, Ishan Wahi had at least 14 prior knowledge of Coinbase’s plans to add specific crypto assets and when Coinbase would publish the list of those assets, and disclosed that Coinbase confidential information to his brother Nikhil Wahi or His friend Sameer Ramani so that they could trade these crypto assets profitably ahead of Coinbase’s public listing announcement.
After being tipped off by Ishan Wahi, Nikhil Wahi and Sameer Ramani used anonymous Ethereum blockchain wallets to buy these cryptoassets some time before Coinbase publicly announced that they were listing or considering listing them on its exchange. After the Coinbase public listing announcement, Nikhil Wahi and Sameer Ramani sold them for profit. According to confidential information provided by Ishan Wahi, Nikhil Wahi and Sameer Ramani traded collectively some time before at least 14 separate Coinbase public listing announcements involving at least 25 different cryptoassets. Nikhil Wahi and Sameer Ramani collectively generated realized and unrealized gains of at least approximately $1.5 million as a result of the insider trading scheme.
To conceal their crypto asset purchases ahead of the Coinbase listing announcement, Nikhil Wahi and Sameer Ramani used centralized exchange accounts held in someone else’s name and moved funds, crypto assets, and income from the plan. Nikhil Wahi and Sameer Ramani also regularly create and use new Ethereum blockchain wallets without any prior transaction history to further conceal their involvement in the scheme.
Ishan Wahi trying to escape the US
On April 11, 2022, Coinbase announced that it was considering listing dozens of crypto assets on its exchange. According to Coinbase confidential information provided by Ishan Wahi, Sameer Ramani used multiple anonymous Ethereum blockchain wallets to purchase at least six crypto assets in bulk, which will appear in Coinbase’s April 11, 2022 listing announcement.
Shortly after Sameer Ramani traded ahead of Coinbase’s April 11 listing announcement, on April 12, 2022, a Twitter account well-known in the crypto community tweeted about the Ethereum blockchain wallet, “After the launch of Coinbase About 24 hours before the announcement, the wallet purchased hundreds of thousands of dollars in tokens that only appeared in Coinbase asset listing posts.” The trading activity mentioned in the April 12 tweet was that of Sameer Ramani. Coinbase has since responded publicly on Twitter that it had opened an investigation into 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 the appropriate authorities (and possibly criminal prosecution).”
On May 11, 2022, Coinbase’s Head of Security Operations emailed Ishan Wahi notifying him that he should attend an in-person meeting related to Coinbase’s asset listing process on Monday, May 16, 2022 at Coinbase’s Seattle, Washington office. Ishan Wahi confirmed that he will be present at the meeting.
On the evening of Sunday, May 15, 2022, Ishan Wahi purchased a one-way flight to India, which was scheduled to depart the next day shortly before Ishan Wahi accepted the Coinbase conference. Before boarding the plane, Ishan Wahi falsely told Coinbase employees that he had left for India, when in fact he had not. In the hours between booking the flight and planning to take off, Ishan Wahi called and texted Nikhil Wahi and Sameer Ramani about the Coinbase investigation, and sent both of them a copy of his dated May 11, 2022 from Photo of the message received by the Director of Security Operations at Coinbase. Before boarding a flight to India on May 16, 2022, Ishan Wahi was stopped by law enforcement and prevented from leaving the country.
ISHAN WAH, 32, of Seattle, Washington, is charged with two counts of conspiracy to commit wire fraud and two counts of mail fraud, each with a maximum sentence of 20 years in prison.
NIKHIL WAHI, 26, of Seattle, Washington, is charged with one count of conspiracy to commit wire fraud and one count of mail fraud, each with a maximum sentence of 20 years in prison.
SAMEER RAMANI, 33, of Houston, Texas, is charged with one count of conspiracy to commit wire fraud and one count of mail fraud, each with a maximum sentence of 20 years in prison.
The statutory maximum sentence is set by Congress and is provided here for informational purposes only, as any sentencing of the accused will be determined by a judge.
Mr Williams praised the FBI’s investigation. He also thanked the Justice Department’s National Cryptocurrency Enforcement Team and the Securities and Exchange Commission, which filed separate civil lawsuits against the defendants today. Mr. Williams further thanked Coinbase Global, Inc. for its cooperation with the investigation.
The case is handled by the Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Noah Solowiejczyk and Nicolas Roos are in charge of the prosecution.
The charges in the indictment are mere charges, and the defendant is presumed innocent unless proven guilty.
Coinbase CEO Brian Armstrong responded to this tweet (https://twitter.com/brian_armstrong/status/1550162989881253889), “Coinbase actively monitors illegal activity and investigates any suspected misconduct. In April of this year, we received information about assets being held at Coinbase. Information about possible front-running trades that appeared shortly before listing. We immediately launched an investigation. As a result of our investigation, we identified 3 suspects and provided this information to law enforcement. One of them was a Coinbase employee, We fired him. Today, the Department of Justice brought criminal charges against this former employee and two others for this abuse. Front-running trading at Coinbase is illegal, we investigate bad actors and turn over to law enforcement, who will face legal consequences”.
Wu said previously reported
In the Coinbase insider trading investigation conducted by Wu Shuo , it was found that the price of Coinbase’s new coins increased more than Binance’s in the week before the launch. Without considering outliers (the increase of more than 1 times), the average increase of Coinbase’s new coins is 24.3%, and that of Binance is 5.6%; in terms of outliers, Coinbase has 18 coins that increase by more than 1 times, accounting for about 15.3%, The biggest increase in 7 days is about 6.6 times.
According to the latest roadmap , Coinbase will list a large number of tokens in the second quarter of this year, of which 50 are explicitly listed. The scale of this launch is relatively large, but the quality is as always “mixed with good and bad”, which has aroused the ridicule of overseas public opinion groups. We have published an inventory of these new tokens.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/full-text-of-the-us-department-of-justice-for-the-first-time-the-details-of-the-escape-of-the-former-coinbase-employee-who-were-caught-in-the-encrypted-insider-trading-are-like-a-blockbuster/
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