US files its first criminal charges over insider trading of cryptocurrency

American authorities continue to crack down on insider trading of digital assets. The New York Times reports that federal prosecutors in New York City have charged three people with wire fraud related to a cryptocurrency insider trading scheme, including former Coinbase exchange clerk Ishan Wahi. This is the first time officials have filed charges for insider trading of digital currency, according to Southern District of New York Attorney Damian Williams.

As in an accompanying civil case filed by the Securities and Exchange Commission, prosecutors allege Wahi shared confidential information about future IPOs with his brother, Nikhil Wahi, and his brother’s friend, Sammer Ramani. The data, shared between “at least” June 2021 and April 2022, helped Nikhil and his friend buy assets before the listing boosted their value. The two would then sell their assets at a profit. The purchases of 25 or more assets generated more than $1.1 million in profit, according to the SEC.

Coinbase launched an internal investigation in April in response to a Twitter post about unusual trading activity. Ishan Wahi booked a flight to India just before Coinbase was due to interview him, but he and his brother were arrested in Seattle this morning. Ramani is still at large and is believed to be in India, the SEC said.

Wahi’s lawyers have maintained their client’s innocence and said he will “vigorously” defend himself against the charges. Ramani and Wahi’s brother’s attorney have not commented on the charges. Coinbase said it shared information with the Justice Department and fired Wahi under a “zero tolerance” policy for the behavior.

This is far from the biggest crypto case. Lending firm BlockFi recently paid $100 million to resolve securities breaches, while Telegram had to pay back investors $1.2 billion for its own breaches, in addition to $18.5 million. However, the indictments are intended to send out more of a warning. The government wants to make it clear that cheating is illegal, whether it’s “on the blockchain or on Wall Street,” as Williams explained The times. This is both about discouraging would-be crooks and punishing defenders.