Ex-Coinbase employee charged with front-running crypto listings

114
2
Ex-Coinbase employee charged with front-running crypto listings

The former product manager of Coinbase, Ishan Wahi, and two associates have been charged with allegedly front-running token listings.

The U.S. Justice Department's crackdown on crypto has grown a lot more pronounced. On Thursday, federal prosecutors indicted a former employee of Coinbase, the leading cryptocurrency exchange, and two others in the first case of insider trading involving cryptocurrencies.

In a 22-page indictment, prosecutors in New York allege that Ishan Wahi, his brother Nikhil Wahi, and his friend Sameer Ramani used Ishan's connections to learn which crypto assets were scheduled to be listed on Coinbase's exchanges. The group then bought the tokens and sold them after the information became public, which usually boosted the value of the tokens.

The three men traded over 25 different crypto assets on at least 14 occasions, and walked away with $1.5 million in illegal profits, according to the indictment. The use of sensitive information to profit from trading securities is a criminal offense.

The SEC also sued the three defendants and accused Ishan of tipping off Nikhil Wahi and Ramani about the imminent lists of tokens, including lightly traded names POWR, LCX and AMP.

The three are being charged with wire fraud conspiracy and wire fraud. Nate Chastain, who worked for OpenSea for 14 years, was arrested for alleged insider trading by FT's parent company.

The charges are a further reminder that Web3 is not a law-free zone, Williams said. While there has been a decade-long debate between crypto and securities, the Justice Department has made it clear that digital assets are covered by the same laws that encompass stocks, bonds, and other instruments.

The SEC said 'digital assets', 'tokens', and 'coins' meet the definition of securities.

The emergence of fraud has become a part of crypto's reputation, following the numerous rug pulls and alleged Ponzi schemes. Some believe it will continue to worsen.

The Southern District of New York confirmed in the indictment that this case was brought to their attention by a supposed to be crypto influencer Cobie. When Ishan Wahi tried to flee the United States to India on May 16, he was blocked from leaving the country by law enforcement. He was also arrested but Ramani remains at large. All three face a maximum of 20 years in prison if convicted.

With this latest action, the U.S. government has sent a clear message to crypto community that they must play by the rules, even as the debate over tokens continues to rage.