United States initiates criminal proceedings for insider trading in cryptocurrency

American authorities are intensifying their efforts to combat insider trading in digital assets, with recent charges being brought against individuals involved in a cryptocurrency scheme. According to a report by The New York Times, federal prosecutors in New York City have charged three individuals, including former Coinbase exchange employee Ishan Wahi, with wire fraud related to insider trading.

Allegations suggest that Wahi shared confidential information about upcoming asset listings with his brother Nikhil Wahi and a friend named Sammer Ramani between June 2021 and April 2022. The shared information enabled Nikhil and Ramani to purchase assets before their listing, resulting in significant profits. The Securities and Exchange Commission (SEC) reported that these transactions yielded a profit of over $1.1 million for purchases of 25 or more assets.

Coinbase initiated an internal investigation following a Twitter post highlighting unusual trading activities. Ishan Wahi attempted to evade questioning by booking a flight to India but was apprehended in Seattle along with his brother. Ramani, however, remains at large and is believed to be in India, according to the SEC.

Despite the allegations, Wahi’s legal representation has maintained his innocence and vowed to vigorously defend him against the charges. Ramani and Nikhil Wahi’s attorney have not provided comments on the accusations. In response to the situation, Coinbase confirmed that they had cooperated with the Justice Department, terminated Wahi’s employment, and enforced a “zero-tolerance” policy towards such misconduct.

While this case is not the largest in the realm of cryptocurrency, recent incidents such as BlockFi’s $100 million settlement for securities violations and Telegram’s $1.2 billion refund to investors for regulatory breaches underscore the government’s commitment to combat fraud in the digital asset space. The charges also serve as a deterrent, signaling that fraudulent activities will be prosecuted whether they occur on the blockchain or traditional financial markets, as articulated by Southern District of New York attorney Damian Williams in his conversation with The Times. The primary objective is to dissuade potential wrongdoers and uphold the rule of law.