Three accused in first-ever cryptocurrency insider trading tip system | USAO-SDNY

Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, deputy executive director of the New York Branch of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment against ISHAN WAHI, a former Product Managers at Coinbase Global, Inc. (“Coinbase”), NIKHIL WAHI and SAMEER RAMANI, with wire fraud conspiracy and wire fraud in connection with a plan to commit insider trading in cryptocurrency assets using confidential Coinbase information about what crypto assets it is It was planned to be listed on Coinbase exchanges. ISHAN WAHI and NIKHIL WAHI were arrested this morning in Seattle, Washington and will be produced before the United States District Court for the Western District of Washington today. SAMEER RAMANI was also charged today and remains at large.

US Attorney Damian Williams said: “Today’s indictments are another reminder that Web3 is not a lawless zone. Just last month I announced the first-ever inside trade case involving NFTs, and today I announce the first-ever inside trade case involving cryptocurrency markets. Our message with these allegations is clear: fraud is fraud is fraud, whether on the blockchain or on Wall Street. And the Southern District of New York will tirelessly continue to bring fraudsters to justice wherever we find them.”

FBI Assistant Director Michael J. Driscoll said, “Although 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 claimed, have the defendants made illicit trades 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 – both the ‘old’ and the ‘new’.”

As alleged in the indictment, which was unsealed in federal court in Manhattan[1]:

background

At all relevant times, Coinbase has been one of the largest cryptocurrency exchanges in the world. Coinbase users have been able to buy, trade and sell various crypto assets through online Coinbase user accounts. Coinbase periodically added new crypto assets to those that could be traded through its exchange, and the market value of crypto assets typically increased significantly after Coinbase announced that it would list a particular crypto asset. Accordingly, Coinbase kept such information strictly confidential and prohibited its employees from sharing this information with others, including providing a “tip” to any person who might act on the basis of this information.

From about October 2020, ISHAN WAHI worked at Coinbase as a product manager assigned to a Coinbase asset listings team. In this 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 planned to list and the timing of public announcements about those crypto Asset Listings. At least in August 2021 and until May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel dedicated to a small number of Coinbase employees who were directly involved in the Coinbase asset listing process. Among other things, the private channel discussed “exact announcement/launch dates + schedules”, which Coinbase did not want to share with all of its employees.

The insider trading system

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 certain crypto assets and the timing of Coinbase’s public announcements of those asset listings, and misappropriated them confidential information from Coinbase by tipping either his brother, NIKHIL WAHI, or ISHAN WAHI’s friend and collaborator, SAMEER RAMANI, so that they could place profitable trades in these cryptoassets ahead of Coinbase’s public listing announcements.

After receiving tips from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets just before Coinbase publicly announced that they would be listing or listing these crypto assets on their exchanges. Following Coinbase’s public listing announcements, NIKHIL WAHI and RAMANI sold the crypto assets at a profit. Based on confidential information from ISHAN WAHI, NIKHIL WAHI and RAMANI traded together shortly before at least 14 separate Coinbase announcements of public listing of at least 25 different crypto assets. As a result of the insider trading scheme, NIKHIL WAHI and RAMANI collectively realized at least approximately $1.5 million in realized and unrealized gains.

To hide their crypto asset purchases from Coinbase listing announcements, NIKHIL WAHI and RAMANI used accounts on centralized exchanges maintained on behalf of others and transferred funds, crypto assets and proceeds from their program across multiple anonymous Ethereum platforms. Blockchain wallets. NIKHIL WAHI and RAMANI also regularly created and used new Ethereum blockchain wallets with no prior transaction history to further hide their involvement in the program.

ISHAN WAHI’s attempt to flee the United States

On April 11, 2022, Coinbase announced that it is considering potentially listing dozens of crypto assets on its exchanges. Based on Coinbase confidential information provided by ISHAN WAHI, RAMANI led several anonymous Ethereum blockchain wallets to buy bulk amounts of at least six of the crypto assets to be included in Coinbase’s April 11, 2022 listing announcement.

Shortly after RAMANI acted in advance of Coinbase’s April 11 listing announcement, a Twitter account well known in the crypto community tweeted on April 12, 2022 about an Ethereum blockchain wallet “that bought hundreds of thousands of dollars in tokens The trading activity referenced in the April 12 tweet was trading caused by RAMANI. Coinbase then responded publicly on Twitter, noting that it had already begun investigating the matter, and stating in a public blog post a few weeks later that any Coinbase employee who disclosed confidential company information would be “immediately terminated and reported to the appropriate authorities.” would be referred (possibly to prosecution). ).”

On May 11, 2022, Coinbase’s Director of Security Operations emailed ISHAN WAHI to inform him that he would be attending a face-to-face meeting on Monday, May 16, 2022 at the Coinbase offices in Seattle, Washington related to Coinbase’s asset listing process. ISHAN WAHI confirmed that he would attend the meeting.

On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a one-way flight to India, scheduled to depart the next day, just before ISHAN WAHI was scheduled to be interviewed by Coinbase. Before boarding the plane, ISHAN WAHI mistakenly told Coinbase staff 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 Coinbase’s investigation and sent both of them a photo of the messages he received from Coinbase’s security director on May 11, 2022 would have . Before boarding the flight bound for India on May 16, 2022, ISHAN WAHI was stopped by law enforcement and prevented from leaving the country.

* * *

ISHAN WAHI, 32, of Seattle, Wash., is charged with conspiracy to two counts of wire fraud and two counts of wire fraud, each carrying a maximum sentence of 20 years.

NIKHIL WAHI, 26, of Seattle, Wash., is charged with one count of conspiracy to wire fraud and one count of wire fraud, each carrying a maximum sentence of 20 years.

SAMEER RAMANI, 33, of Houston, Texas, is charged with conspiracy to wire fraud and one count of wire fraud, each carrying a maximum sentence of 20 years.

The maximum statutory penalties are prescribed by Congress and are provided here for informational purposes only, as each conviction of the accused is decided by a judge.

Mr. Williams praised the FBI’s investigative work. He also acknowledged the support of the Justice Department’s National Cryptocurrency Enforcement Team as well as the Securities and Exchange Commission, which separately launched civil proceedings against the defendants today. Mr. Williams also thanked Coinbase Global, Inc. for its cooperation with the investigation.

This case is being handled by the Office’s Securities and Commodity Fraud Task Force. United States Assistant Attorneys Noah Solowiejczyk and Nicolas Roos are serving the prosecution.

The allegations in the indictment are allegations only, and the accused are presumed innocent until proven guilty.


[1] As the opening sentence 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.

Latest articles

Related articles

Leave a reply

Please enter your comment!
Please enter your name here