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Insider trading has plagued tradfi since the inception of Wall Street. Unsurprisingly, such unscrupulous behavior has spilled over to the crypto scene.
Often regarded as the wild west of finance, crypto has the perception that anything goes in the space. And this view is perhaps too regularly held by crypto market participants themselves.
Last month, Blockhead broke the story of insider trading at Singapore NFT project The Other Side, in which its founders rewarded themselves the top prizes offered to members.
Although it’s bizarre as to why the founders thought their crimes would not go undetected, considering the transparency of blockchain transactions, the general lawless nature of crypto could have been an incentive.
Insider trading has also occurred on the higher echelons of crypto institutions. Again last month, a former OpenSea product manager was accused of buying 45 NFTs on 11 separate occasions based on confidential information that the assets would soon be featured on the platform’s home page.
The case marked federal prosecutors’ first case involving digital assets.
It’s a similar story in the case of Coinbase too. On Thursday, Federal authorities brought the first-ever cryptocurrency insider-trading case to courts.
Ishan Wahi, a former product manager at Coinbase, is accused of tipping off his brother Nikhil Wahi and friend Sameer Ramani with confidential information, leading to profits of US$1.5 million.
Wahi had worked on Coinbase‘s asset-listing team and had advance knowledge of the timings and public announcements of assets the exchange planned to list. He also had access to a private messaging channel used to discuss launch dates and timelines.
Both Wahi brothers were arrested on Thursday morning in Seattle but Ramani remains at large. Ishan Wahi had bought a one-way flight to India the day before a meeting with the exchange’s security-operations director but was caught before fleeing.
Ishan Whai’s lawyers have aruged that he “is innocent of all wrongdoing and intends to defend himself vigorously against these charges and in the SEC action.”
Again, it’s unclear as to why the brothers thought their crimes would go undiscovered but the law still applies to such malicious practices irrespective of the asset.
“Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street,” said Damian Williams, U.S. attorney for the Southern District of New York.
Coinbase also revealed it is conducting an investigation on the men involved. “Coinbase takes this type of illicit behavior super seriously,” said Paul Grewal, the company’s chief legal officer. “We have zero tolerance for it.”
Wahi’s bail was set to $1 million and he was ordered to surrender his passports.
As much as the crypto scene has an anything-goes perception, the reality is that federal laws still apply. Those tempted by shady practices should reconsider as ultimately, the law will catch up to you… unless you’re Su Zhu.