A 32-year old former product manager at Coinbase has admitted to gaming the cryptocurrency market and pleaded guilty to two counts of conspiracy to commit wire fraud, the first ever example of an insider admitting guilt in an insider trading case involving cryptocurrencies, according to the Justice Department.
Whether it occurs in the equity markets or the crypto markets, stealing confidential business information for your own personal profit or the profit of others is a serious federal crime, U.S. Attorney Damian Williams said in a statement.
Ishan Wahis plea carries a maximum sentence of 40 years. A lawyer for Wahi declined to comment on the plea deal when reached by Fortune. And Coinbase, which grew suspicious of Wahis conduct in April 2022, distanced itself from the scheme.
Coinbase takes allegations of improper use of company information with the utmost seriousness, a spokesperson told Fortune. We have a zero tolerance for this kind of misconduct. We appreciate the DOJs efforts in holding this individual accountable.
The announcement highlights the federal governments increasing scrutiny of cryptocurrency companies and markets over the past few months. The Justice Department and the Securities and Exchange Commission are also investigating FTX, Gemini, Genesis, Silvergate, and others in the industry for fraud and securities violations.
Wahi conspired with Nikhil Wahi and Sameer Ramani, neither of whom were Coinbase employees, from approximately June 2021 to April 2022 and generated more than a million dollars in profits from insider trading, according to the Justice Departments initial indictment.
Because of his position at Coinbase, Wahi had prior knowledge of when the exchange planned to list new digital assets. On multiple occasions, authorities say he let his two co-conspirators know the assets launch dates, and Nikhil Wahi and Ramani purchased them beforehand at a discounted price. When Coinbase, which is publicly traded and the second largest cryptocurrency exchange by trading volume, announced these assets listings, their prices inevitably went up, and the three conspirators sold them for a profit.
Unusual trading patterns were first discovered in April 2022 when Cobie, an prominent crypto Twitter account, pointed to an Ethereum wallet that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, according to The Verge.
Coinbase took notice and called Wahi in May 2022 for an in-person meeting. Four days later, Wahi bought a one-way ticket to India. But before he could board the flight, law enforcement agents detained him and prevented him from leaving the country, according to the initial indictment.
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