Former Coinbase Manager and Brother Settle SEC Insider Trading Charges
Posted by Colin Lambert. Last updated: May 31, 2023
The US Securities and Exchange Commission (SEC) has announced that former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi, have agreed to settle charges that they engaged in insider trading through a scheme to trade ahead of multiple announcements regarding at least nine crypto asset securities that would be made available for trading on the Coinbase platform.
The two men each agreed to be permanently banned and to pay disgorgement of ill-gotten gains, plus pre-judgment interest. “As is often the case when a criminal court has already ordered defendants to forfeit their ill-gotten gains, the disgorgement and prejudgment interest in the SEC’s case would be deemed satisfied by the orders of forfeiture of the Wahi brothers’ assets in the criminal action, if approved by the court, and the SEC determined not to seek civil penalties in light of the Wahi brothers’ prison sentences,” SEC says.
The SEC’s complaint, filed in July 2022, alleged that while employed at Coinbase, Ishan Wahi helped to coordinate the platform’s public listing announcements that included what crypto assets would be made available for trading. According to the complaint, Coinbase treated such information as confidential and warned its employees not to trade on the basis of, or tip others with, that information.
From at least June 2021 to April 2022, however, in breach of his duties, SEC says Ishan repeatedly tipped the timing and content of upcoming listing announcements to his brother, Nikhil, and his friend, Sameer Ramani. Ahead of those announcements, which usually resulted in an increase in the assets’ prices, Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements for a profit.
The Wahi brothers agreed, as part of the settlement, not to deny the SEC’s allegations.
“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,” says Gurbir Grewal, director of the SEC’s Division of Enforcement. “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, the two men consented to the entry of final judgments. In the criminal action, they 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, and Nikhil was sentenced to 10 months in prison and ordered to forfeit $892,500.