Former Coinbase Manager Picked Up by Feds on Insider Trading Charges
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Coinbase, one of the most popular crypto brokers in the world, has a long history of boosting coins that list on its platform. However, it would appear that this has been both an advantage and a disadvantage.
The “Coinbase Effect” has been one of the biggest sources of gains for new cryptocurrencies. Recently, authorities in the United States charged one of the exchange’s former managers with profiting off the “Coinbase Effect”.
Crypto’s First Insider Trading Case
On Thursday, the U.S. Attorney’s Office for the Southern District of New York announced that it had levelled insider trading charges against Ishan Wahi, a former Global Product Manager at Coinbase. The Office confirmed that Wahi’s brother, Nikhil, and Sameer Ramani, an associate of the brothers, were indicted on the same charges.
The indictment, which was brought up in collaboration with the New York Field Office of the Federal Bureau of Investigation (FBI), alleged that the three men had used confidential information about Coinbase’s listing processes to profit off coins. Wahi, who had worked at the exchange between August 2021 and May 2022, allegedly used his position to obtain details about the exchange’s prospective listing of 25 cryptocurrencies. The three men then bought those coins, capitalising on the “Coinbase Effect” and profiting over $1.5 million.
The U.S. Attorney’s Office pointed out that Wahi’s stint as a Global Product Manager coincided with Coinbase’s listing of the tokens in question. Amongst others, the three men were said to have profited $7,000 from trading Tribe (TRIBE), $900,000 from XYO, and $13,000 from Alchemix (ALCX), Gala (GALA), Ethereum Name Service (ENS) and Powerledger (POWR).
Wahi and his brother were arrested earlier this week in Seattle, but Ramani is still missing.
The SEC Chimes in
Insider trading charges surrounding Coinbase, one of the best cryptocurrency exchanges, began spreading earlier this year. At the time, online investigators found that several Ethereum wallet addresses had made coin purchases just before the exchange announced that it would be listing them later in the year. The discovery led to many claiming that some individuals within the San Francisco-based exchange could have used inside information to trade coins and profit off them.
Found an ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl pic.twitter.com/5QlVTjl0Jp
— Cobie (@cobie) April 12, 2022
Looking to address the issue, Coinbase CEO Brian Armstrong announced in a blog post that the company would change its listing policies to prevent similar crimes from happening.
At the time, Armstrong didn’t confirm or deny whether any Coinbase employees had been punished or reported to the authorities for using inside information to their advantage. However, he acknowledged the possibility of company employees giving out critical listing information to potential criminals – whether wittingly or unwittingly.
The CEO added that Coinbase would change its listing process “to try and prevent on-chain data giving signal to watchful traders”, while company employees would also be restricted to trading on its platform to help monitor their transactions and stay ahead of any possible abuse.
The Wahis and their associate, Ramani, are under investigation by the Securities and Exchange Commission (SEC). On the same day the Feds issued their charges, the financial watchdog issued theirs against the men, claiming that at least 9 of the 25 cryptocurrencies they had traded were securities.
In its indictment, the SEC alleged that the three men had violated the securities laws’ antifraud provisions. Now, it seeks permanent injunctive relief, civil penalties, and disgorgements.
Altogether, the SEC claimed that the men had netted over $1.1 million in profits from their insider trades, with coins like Amp (AM), Kromatika (KROM), DerivaDAO (DDX), DFX Finance (DFX), Rally (RLY), and Rari Governance Token (RGT).
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