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Cryptocurrency's first insider trading scheme leads to 3 being charged

US attorney Damian Williams on crypto scheme: 'Fraud is fraud, whether it occurs in blockchain or on Wall Street'

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A former employee of the cryptocurrency exchange platform Coinbase and two others were charged by the U.S. Securities and Exchange Commission for alleged insider trading valued at more than $1.1 million, according to a lawsuit filed Thursday in U.S. District Court in Seattle.

Prosecutors said this is the first insider-trading case involving cryptocurrency markets, the Seattle Times reported.

"Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street," U.S. attorney Damian Williams said in a news release.

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Between June 2021 and April 2022, former product manager Ishan Wahi, his brother Nikhil Wahi and close friend Sameer Ramani traded crypto assets listed on Coinbase before at least 10 announcements and sold them for a profit, the lawsuit said. Ishan Wahi would tell the two men about the confidential announcements using a foreign phone, prosecutors said.

"The prices of crypto assets identified in these listing announcements, including crypto asset securities, typically appreciate quickly and significantly," the lawsuit said. In some cases, a token’s value can increase 1,200% in a few months.

coinbase

A former employee of the cryptocurrency exchange platform Coinbase and two others were charged for insider trading. This is one of the first cases of cryptocurrency executives being charged in a wire fraud case. (Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Cryptocurrency executives charged in a wire fraud case.

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Coinbase CEO and co-founder Brian Armstrong said in a blog post the company investigated Ishan Wahi’s activities and reported them to the U.S. Department of Justice, which indicted the three men for wire fraud and conspiracy to commit wire fraud Thursday. Ishan Wahi was fired, Armstrong said.

"We have zero tolerance for this and monitor for it, conducting investigations where appropriate with outside law firms," Armstrong said.

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The suspicious activity started when a crypto-focused Twitter account tweeted that an Ethereum blockchain wallet "bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published," which was trading caused by Ramani, the DOJ said.