Former Coinbase Manager and Brother Settle Insider Trading Charges in Crypto Asset Securities Case
The Securities and Exchange Commission (SEC) has announced that former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi, have agreed to settle charges of insider trading in relation to crypto asset securities.
The charges stem from their involvement in a scheme to trade ahead of multiple announcements regarding crypto assets that would be listed on the Coinbase platform. As part of the settlement, the brothers have agreed to be permanently enjoined from violating relevant securities laws and to pay disgorgement of ill-gotten gains, along with prejudgment interest.
The SEC’s complaint, filed on July 21, 2022, alleged that Ishan Wahi, while employed at Coinbase, played a role in coordinating the platform’s public listing announcements. Coinbase treated this information as confidential and cautioned employees against trading or sharing it. However, from June 2021 to April 2022, Ishan allegedly shared the timing and content of upcoming listing announcements with his brother, Nikhil Wahi, and his friend, Sameer Ramani.
Acting on these tips, Nikhil and Ramani reportedly purchased at least 25 crypto assets, nine of which were securities. They then sold the assets shortly after the announcements, profiting from the subsequent price increases. As part of the settlement, the Wahi brothers have not denied the SEC’s allegations.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “While the technologies at issue in this case may be new, the conduct is not. We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple. The federal securities laws do not exempt crypto asset securities from the prohibition against insider trading, nor does the SEC. I am grateful to the SEC staff for successfully working to resolve this matter.”
Subject to court approval, Ishan and Nikhil Wahi have consented to permanent injunctions preventing them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In a related criminal action, both individuals pled guilty to conspiracy to commit wire fraud. Ishan Wahi was sentenced to 24 months in prison and ordered to forfeit 10.97 ether and 9,440 Tether, while Nikhil Wahi received a 10-month prison sentence and was ordered to forfeit $892,500.
The SEC’s investigation into this matter was conducted by Michael Brennan, Jennie B. Krasner, and Gregory Padgett, with assistance from Patrick McCluskey, Sejal Bhakta, and Donald Battle. The case was supervised by Paul Kim, Joseph Sansone, and Carolyn M. Welshhans, while litigation was led by Daniel Maher and Peter Lallas under the supervision of Olivia Choe. The SEC expressed appreciation for the support provided by the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation (FBI).
Insider trading undermines the integrity of financial markets, and this case highlights the SEC’s commitment to holding individuals accountable for their actions, regardless of the asset class involved. The settlement and accompanying criminal charges serve as a reminder that the rules governing securities trading apply to crypto asset securities as well.
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