August 14, 2022

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Three fees charged in first insider cryptocurrency tipping scheme | USAO-SDNY

Damian Williams, the United States Attorney for the Southern District of New York, and Michael Driscoll, associate director in charge of the FBI’s New York field office, announced today the opening of the seal from an indictment indicting Ishan Wahey, former Product Manager at Coinbase Global, Inc. (“Coinbase”), NIKHIL WAHI, and SAMEER RAMANI, with a wire fraud and wire fraud conspiracy in connection with a scheme to commit insider trading in crypto-assets using confidential Coinbase information about crypto-assets scheduled to be listed on Coinbase exchanges. Ishan Wahi and Neil Wahi were arrested this morning in Seattle, Washington, and will appear today in the United States District Court for the Western District of Washington. Sameer Ramani was also shipped today and is still at large.

US Attorney Damian Williams said: “Today’s accusations are yet another reminder that Web3 is not lawless territory. Just last month, it announced the first insider trading case involving NFTs, and today it announced the first ever insider trading case involving the cryptocurrency markets. Our message with these accusations is clear: Fraud is fraud, whether it happens on the blockchain or on Wall Street. The Southern District of New York will continue to work relentlessly to bring fraudsters to justice, wherever we find them.”

“Although the allegations in this case relate to transactions on a cryptocurrency exchange — not a traditional financial market — they still constitute insider trading,” said FBI Assistant Director Michael J. Driscoll. They are legal in at least 25 different crypto assets and have generated illicit gains totaling nearly $1.5 million. Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets – old and new.”

As alleged in the indictment unsealed in Manhattan federal court[1]:

background

At all relevant times, Coinbase has been one of the largest cryptocurrency exchanges in the world. Coinbase users can get, exchange and sell different crypto assets through online user accounts with Coinbase. Periodically, Coinbase added new crypto assets to those that can be traded through the exchange, and the market capitalization of crypto assets increased dramatically after Coinbase announced that it would list a specific crypto asset. Accordingly, Coinbase has kept this information strictly confidential and prohibited its employees from sharing that information with others, including by providing “advice” to anyone who might trade based on that information.

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Starting around October 2020, ISHAN WAHI worked at Coinbase as the appointed Product Manager for the Coinbase Asset List team. In this role, ISHAN WAHI was involved in a top-secret process of listing crypto assets on Coinbase exchanges and had detailed and advanced knowledge of the crypto assets that Coinbase plans to list and the timing of public announcements about crypto asset listings. Beginning at least August 2021 and running through May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel reserved for a small number of Coinbase employees with direct involvement in the Coinbase asset listing process. The private channel was used to discuss, among other things, the “exact announcement/launch dates + timelines” that Coinbase does not want to share with all of its employees.

Insider Trading System

On at least 14 occasions beginning at least June 2021 and running through April 2022, ISHAN WAHI learned in advance that Coinbase plans to list certain crypto assets, the timing of Coinbase’s public announcements to those asset listings, and misappropriation of confidential Coinbase information by tipping. Either his brother, NIKHIL WAHI, or ISHAN WAHI friend and partner, Sameer Ramani, so that they can place profitable deals in these crypto assets ahead of Coinbase’s public listing announcements.

After getting advice from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced that it was listing or considering listing these crypto assets on its exchanges. Following Coinbase’s public listing announcements, NIKHIL WAHI and RAMANI sold crypto assets for profit. Based on confidential information provided by ISHAN WAHI, NIKHIL WAHI and RAMANI collectively, at least 14 separate announcements were traded from Coinbase’s public listing on at least 25 different crypto-assets. As a result of the insider trading scheme, NIKHIL WAHI and RAMANI collectively generated realized and unrealized gains totaling at least $1.5 million.

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To hide their purchases of crypto assets before Coinbase listings announcements, NIKHIL WAHI and RAMANI used accounts on central exchanges held in the names of others, and transferred funds, crypto assets, and proceeds of their scheme through multiple anonymous Ethereum blockchain wallets. NIKHIL WAHI and RAMANI also regularly create and use new Ethereum blockchain wallets without any previous transaction history in order to disguise their participation in the scheme.

Ishaan Wahi’s attempt to escape from the United States

On April 11, 2022, Coinbase announced that it was studying the possibility of listing dozens of crypto assets on its exchanges. Based on confidential Coinbase information provided by ISHAN WAHI, RAMANI caused several anonymous Ethereum blockchain wallets to purchase large amounts of at least six crypto assets that were due to be included in Coinbase’s listing announcement on April 11, 2022.

Shortly after trading RAMANI prior to the announcement of the Coinbase listing on April 11, 2022, a Twitter account well known in the crypto community tweeted regarding the Ethereum blockchain wallet “purchasing hundreds of thousands of dollars of tokens exclusively in a Coinbase asset listing post before 24 About an hour after it was posted. The trading activity referenced in the April 12 tweet is the trading caused by RAMANI. Coinbase then responded publicly on Twitter noting that it had already begun an investigation into the matter and a few weeks later stated in a public blog post that any Coinbase employee leaking confidential information about the company would be “immediately terminated and referred to relevant authorities (potentially criminal prosecution)” ).”

On May 11, 2022, Coinbase’s Director of Security Operations sent an email to ISHAN WAHI informing him that he should attend an in-person meeting related to the listing of Coinbase’s assets at Coinbase’s office in Seattle, Washington on Monday, May 16, 2022. Ishan Wahi confirmed that he would attend the meeting.

On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a round-trip flight to India that was scheduled to depart the next day shortly before Ishan WAHI was interviewed by Coinbase. Before boarding the plane, ISHAN WAHI falsely told Coinbase employees that he had already left for India when he had not. In the hours between booking the flight and his scheduled departure, Ishan Wahi called and texted NIKHIL WAHI and RAMANI regarding the Coinbase investigation, each with a photo of the messages he received on May 11, 2022, from Coinbase’s Director of Security Operations. . Before boarding a May 16, 2022 flight to India, Ishaan Wahi was stopped by law enforcement and prevented from leaving the country.

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* * *

Ishan Wahey, 32, of Seattle, Washington, is charged with two counts of wire fraud conspiracy and two counts of electronic fraud, each with a maximum sentence of 20 years.

Nakhal Wahi, 26, of Seattle, Washington, is charged with one count of conspiracy to wire fraud and one count of Internet fraud, each with a maximum sentence of 20 years.

Sameer Ramani, 33, of Houston, Texas, is charged with one count of conspiracy to wire fraud and one count of wire fraud, each with a maximum sentence of 20 years.

Maximum statutory provisions are set by Congress and are provided here for informational purposes only, as any sentencing of the accused will be determined by the judge.

Mr. Williams commended the investigation work of the FBI. He also acknowledged assistance from the Justice Department’s National Crypto Enforcement Team, as well as from the Securities and Exchange Commission, which separately launched civil proceedings against the defendants today. Mr. Williams also thanked Coinbase Global, Inc. for its cooperation with the investigation.

This case is being handled by the Bureau’s Securities and Commodities Fraud Task Force. US Assistant Prosecutors Noah Solovicic and Nicholas Ross are responsible for the prosecution.

The allegations in the indictment are mere accusations, and the accused are presumed innocent unless and until proven guilty.


[1] As the introductory statement indicates, the entire text of the indictment and the description of the indictment set forth herein, constitute allegations only, and every fact described must be treated as an allegation.