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Three charged in first-ever crypto insider trading rollover scheme | USAO-SDNY

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Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Acting Director of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment against ISHAN WAHI, a former Product Manager at Coinbase Global, Inc. (“Coinbase”), NIKHIL WAHI and SAMEER RAMANI, with a wire fraud conspiracy and wire fraud conspiracy in connection with a scheme to commit insider trading in crypto assets using Coinbase’s confidential information about which crypto assets were planned to be listed on exchanges Coinbase. ISHAN WAHI and NIKHIL WAHI were arrested this morning in Seattle, Washington, and will appear today in the United States District Court for the Western District of Washington. SAMIR RAMANI was also charged today and remains at large.

U.S. Attorney Damian Williams said: “Today’s allegations are another reminder that Web3 is not a law-free zone. Just last month, I announced the first ever insider trading case involving NFTs, and today I am announcing the first ever insider trading case involving the cryptocurrency markets. Our message with these allegations is clear: fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to ruthlessly bring fraudsters to justice wherever we find them.”

FBI Assistant Director Michael J. Driscoll said: “While the allegations in this case involve transactions made on a crypto exchange rather than a more traditional financial market, they still constitute insider trading. The defendants allegedly made illegal transactions with at least 25 different crypto assets and received illegal proceeds totaling about $1.5 million. Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets, both “old” and “new.”

According to the indictment unsealed in federal court in Manhattan.[1]:

Background

At all times, Coinbase has been one of the largest cryptocurrency exchanges in the world. Coinbase users could purchase, exchange, and sell various crypto assets through online Coinbase user accounts. 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 the listing of a particular crypto asset. Accordingly, Coinbase kept such information strictly confidential and prohibited its employees from sharing this information with others, including by providing a “hint” to any person who may trade based on this information.

Around October 2020 ISHAN WAHI worked at Coinbase as a Product Manager in the Coinbase Asset Listing Group. In this role, ISHAN WAHI participated in the highly confidential process of listing crypto assets on Coinbase exchanges and had detailed and in-depth knowledge of which crypto assets Coinbase planned to list and the timing of public announcements of the listings of these crypto assets. From at least August 2021 until May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel reserved for a small number of Coinbase employees who were directly involved in the Coinbase asset listing process. The private channel was used, among other things, to discuss “exact announcement/launch dates + timelines” that Coinbase didn’t want to share with all of its employees.

Insider trading scheme

On at least 14 occasions, beginning at least June 2021 and continuing through April 2022, ISHAN WAHI had advance knowledge of both Coinbase’s plans to list certain crypto assets and the timing of Coinbase’s public announcements of listings of those assets, and misappropriated this confidential information to Coinbase by informing either his brother NIIKHIL WAHI or ISHAN WAHI’s friend and collaborator, SAMIR RAMANI, so that they could place profitable trades in these crypto assets prior to Coinbase’s public listing announcement.

After receiving advice from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced or considered listing these crypto assets on its exchanges. Following the Coinbase public listing announcement, NIKHIL WAHI and RAMANI sold crypto assets at a profit. Based on confidential information provided by ISHAN WAHI, NIKHIL WAHI and RAMANI jointly traded shortly before at least 14 separate Coinbase public listing announcements relating to 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 hide their purchases of crypto assets prior to the Coinbase listing announcement, NIKHIL WAHI and RAMANI used accounts on centralized exchanges in the names of others and transferred funds, crypto assets, and proceeds from their scheme through several anonymous Ethereum blockchain wallets. NIKHIL WAHI and RAMANI also regularly created and used new Ethereum blockchain wallets with no prior transaction history to further hide their participation in the scheme.

ISHAN WAHI’s attempt to escape the United States

On April 11, 2022, Coinbase announced that it was considering listing dozens of crypto assets on its exchanges. Based on confidential Coinbase information provided by ISHAN WAHI, RAMANI forced several anonymous Ethereum blockchain wallets to purchase large quantities of at least six crypto assets that were to be listed on Coinbase on April 11, 2022.

Shortly after RAMANI held trades ahead of the Coinbase listing announcement on April 11, on April 12, 2022, a Twitter account well known in the crypto community tweeted about an Ethereum blockchain wallet “which bought hundreds of thousands of dollars worth of tokens, exclusively represented by in the crypto community. A post listing Coinbase assets approximately 24 hours before it was published.” The trading activity mentioned in the April 12 tweet was driven by RAMANI. Following this, Coinbase publicly responded on Twitter, noting that it had already launched an investigation into the matter, and a few weeks later stated on a public blog that any Coinbase employee who divulged confidential information about the company would be “immediately fired and referred to the appropriate authorities (possibly for prosecution). )”.

On May 11, 2022, the COO of Coinbase sent an email to ISHAN WAHI to inform him that he must attend an in-person meeting related to the Coinbase asset listing process at the Coinbase office in Seattle, Washington on Monday, May 16, 2022 . ISHAN WAHI confirmed he would attend the meeting.

On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a one-way ticket to India, which was due to depart the next day, shortly before ISHAN WAHI was scheduled to give an interview to Coinbase. Before boarding the flight, ISHAN WAHI falsely informed Coinbase employees that he had already flown to India, although this did not happen. In the hours between booking the flight and scheduled departure, ISHAN WAHI called and wrote to NIKHIL WAHI and RAMANI about the Coinbase investigation and sent them both a photo of the messages he received on May 11, 2022 from Coinbase’s Chief Security Officer. . Before boarding a flight on 16 May 2022 to India, ISHAN WAHI was stopped by law enforcement and prevented from leaving the country.

* * *

Ishan WAHI, 32, of Seattle, Washington, is charged with two counts of wire conspiracy and two counts of wire fraud, each with a maximum sentence of 20 years.

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

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

Statutory maximum sentences are set by Congress and are provided here for informational purposes only, as any sentence for defendants will be determined by a judge.

Mr. Williams praised the FBI’s investigative work. He also noted the help of the Department of Justice’s National Cryptocurrency Enforcement Group, as well as the Securities and Exchange Commission, which today separately filed a civil case against the defendants. Mr. Williams also thanked Coinbase Global, Inc. for cooperating with the investigation.

The Securities and Commodities Enforcement Administration Task Force is handling this case. Assistant US Attorneys Noah Soloveitchik and Nicholas Roos are responsible for the prosecution.

The allegations in the indictment are simply charges and the defendants are presumed innocent until proven guilty.


[1] As the opening phrase means, the entire text of the indictment and the description of the indictment set out therein are only allegations, and every fact described should be considered as an allegation.

#charged #firstever #crypto #insider #trading #rollover #scheme #USAOSDNY

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