Former Coinbase product manager Ishan Wahi has pleaded guilty to two counts of conspiracy to commit wire fraud connected to an insider trading scheme at the U.S. exchange.
In a Feb. 7, 2023 court hearing, Wahi admitted to sharing data about forthcoming Coinbase cryptocurrency listings with his younger sibling Nikhil and their friend Sameer Ramani. The rise in the value of the tokens after their Coinbase listing allowed the younger Wahi and their mutual friend to reap at least $1.5 million in profits illegally, U.S. Department of Justice prosecutors asserted.
Ishan Wahi pleaded not guilty last year after a Twitter user unveiled an Ethereum wallet holding hundreds of thousands of crypto tokens bought 24 hours before they were listed on Coinbase. The wallet belonged to Ramani, who purchased the tokens using Wahi’s information.
Following the Twitter post, Coinbase security arranged a meeting with Wahi in their Seattle Office. Before the meeting, Wahi’s flight to India was prevented by U.S. law enforcement.
Federal Judge Preska has set May 10, 2023, as the hearing date for sentencing. Ishan Wahi will likely be imprisoned for 36 to 47 months, while his brother is currently serving a ten-month sentence after pleading guilty to a similar wire fraud charge last year.
As part of his sentence, Nikhil Wahi has to pay back $892,500 in illegal profits. He also faces potential deportation to India after serving his term. His lawyer allegedly argued that the younger Wahi wanted to use the money to help his parents retire.
SEC Pursues Strongarm Tactics to Be Cop on the Beat
Before the DoJ filed criminal charges, the U.S. Securities and Exchange Commission filed a parallel civil suit.
While the civil suit may seem unremarkable to outside users, the SEC’s assertions that some digital assets could be securities via its Munchee ruling and the 2017 DAO report, coupled with its pursuit of insider trading charges, could help build its case as the crypto regulator of choice.
Already the agency asserts that POWR, DFX, LCX, RGT, KROM, RLY, DDX, XYO, and Amp fit the federal definition of security. It recently won a case against the content distribution platform LBRY for offering its LBC token as an unregistered security.
According to Fordham University’s Benjamin Cole, an SEC victory in the Coinbase civil case could see exchanges scramble to determine which tokens are securities. Furthermore, clients could see their token holdings in said securities collapse virtually overnight.
“It could cripple centralized crypto exchanges,” Cole said.
Additionally, an SEC victory could stoke the turf wars between the SEC and sister agency, the Commodity Futures Trading Commission. Recently, Chairman Rostin Behnam has voiced his desire to pursue regulation with Congress in addition to enforcement.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.