$1.5M Crypto Scheme Leads To 2-Year Prison Term For Ex-Coinbase Manager

Yesterday, a former Coinbase product manager, Ishan Wahi, was sentenced to two years in prison for running the first cryptocurrency insider trading scheme investigated by the United States Department of Justice.

Wahi had pleaded guilty after Coinbase and the FBI found that he provided confidential information on upcoming Coinbase crypto asset listings to his brother, Nikhil, and his friend Sameer Ramani. The multiple tipoffs led to profits of approximately $1.5 million as the men went undetected for 10 months, trading 55 digital assets ahead of Coinbase listing announcements that generally caused huge spikes in asset market valuation.

The US attorney for the Southern District of New York, Damian Williams, condemned Wahi’s actions, saying that he “violated the trust placed in him by his employer by tipping others with valuable confidential information regarding Coinbase’s planned token listings.”

“Today’s sentence should send a strong signal to all participants in the cryptocurrency markets that the laws decidedly do apply to them,” Williams said in a DOJ press release.

Coinbase did not immediately respond to Ars’ request for comment, and Wahi’s lawyer had no comment on the news.

At the sentencing hearing, Wahi expressed remorse, Reuters reported, telling the court, “I made a huge mistake that will follow me for the rest of my life.”

Prosecuting assistant US attorney Noah Solowiejczyk pushed back on this characterization, saying that Wahi’s continuous breach of Coinbase’s trust was “not a one-off mistake” but a series of tips over several months. US District Judge Loretta Preska described Wahi’s conduct as a “massive abuse” of his role at Coinbase.

His brother Nikhil was previously sentenced to 10 months in prison, and Wahi had asked the court to give him a similar sentence, Reuters reported. But prosecutors urged Preska to consider a sentence of up to three years to adequately deter other cryptocurrency traders from similarly abusing corporate information. Wahi’s two-year sentence meets both requests in the middle but seems intended to deter others considering gaming crypto markets.

While the sentencing marks an end to the DOJ’s investigation into Wahi, the larger investigation into insider trading is not over. Wahi must still iron out terms of a settlement agreement reportedly reached with the Securities and Exchange Commission, and his third co-conspirator, Ramani, is still at large, Reuters reported.

The SEC’s ongoing inquiry remains a point of contention for Coinbase. According to Reuters, the DOJ had “more latitude” to investigate “crypto-related wrongdoing” in this case than the SEC, which can only investigate the securities markets. Last year, Coinbase CEO and co-founder Brian Armstrong said that “the SEC charges are an unfortunate distraction” from the DOJ’s more appropriate charges, partly because Coinbase holds that it does not list securities.

However, the SEC has recently pushed to classify more digital tokens traded on exchanges as securities, The Wall Street Journal reported. This week, Armstrong criticized SEC chair Gary Gensler for having an “anti-crypto view,” CNBC reported.

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