Former Coinbase product manager sentenced in first cryptocurrency insider trading case
In a landmark legal decision, a former Coinbase Global Inc. product manager has been sentenced to two years in prison in what is being deemed the United State’s first case of insider trading involving cryptocurrency. Ishan Wahi, 32 years old, received his sentence from US District Judge Loretta Preska in a Manhattan federal court yesterday after pleading guilty to two counts of conspiracy to commit wire fraud in February.
Wahi’s case is one of several high-profile cryptocurrency-related cases brought by US prosecutors in New York, which includes an ongoing case against FTX founder Sam Bankman-Fried, who maintains his innocence. Prosecutors discovered that Wahi had shared confidential information on which digital assets would be listed on Coinbase, a leading global cryptocurrency exchange, with his brother Nikhil and their friend Sameer Ramani.
This insider knowledge enabled the three individuals to make US$1.5 million by trading 55 digital assets in advance of the listing announcements between June 2021 and April 2022, prosecutors said. In September, Nikhil Wahi pleaded guilty to wire fraud conspiracy and received a 10-month prison sentence in January, while Ramani remains at large.
Ishan Wahi had requested a lesser sentence, pointing to other insider trading cases that resulted in minimal or no jail terms. Despite this, prosecutors successfully argued for a longer sentence to deter other cryptocurrency insiders from misusing corporate information.
Notably, prosecutors have the authority to charge fraud in situations where deception is used to obtain financial gain, irrespective of the type of asset involved. This legal power provides the US Justice Department with greater scope to pursue cases of crypto-related misconduct than its civil counterpart, the US Securities and Exchange Commission (SEC), which is limited to regulating securities markets.
The SEC has claimed in multiple lawsuits that several digital assets are, in fact, securities. Ongoing settlement discussions are underway between Ishan Wahi and the SEC, as well as between Nikhil Wahi and the SEC. Coinbase, on the other hand, maintains that it does not list any securities. The outcome of these insider trading cases sends a clear message that the US Justice Department is committed to cracking down on fraudulent activity within the rapidly evolving cryptocurrency industry, reports Channel News Asia.
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