The Securities and Exchange Commission (SEC) has announced the resolution of insider trading charges involving former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi. The pair had allegedly engaged in a scheme trading ahead of multiple announcements about new crypto assets becoming available for trading on Coinbase.
As part of the settlement, the SEC reports that the Wahi brothers consented to be permanently barred from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5. They've agreed to disgorge their ill-gotten gains and pay prejudgment interest. The SEC will not pursue civil penalties as the brothers' assets in the criminal action would fulfill the SEC's disgorgement, provided the court approves the forfeiture. Crypto Criminal Defense Lawyer
While Ishan was employed at Coinbase, he allegedly leaked upcoming listing information to Nikhil and a friend, Sameer Ramani, which is considered insider trading. This information was deemed confidential by Coinbase and employees were warned against trading or tipping others based on it. The brothers reportedly purchased at least 25 crypto assets before their official listing, selling them after the announcement for a profit.
The SEC’s Division of Enforcement Director, Gurbir S. Grewal, emphasized that regardless of the novel technologies, insider trading laws still apply.
‘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,” said Gurbir S. 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.”
In addition to the SEC settlement, the Wahi brothers also faced criminal charges. They pled guilty to conspiracy to commit wire fraud, with Ishan receiving a 24-month prison sentence and an order to forfeit 10.97 ether and 9,440 Tether, and Nikhil receiving a 10-month sentence and order to forfeit $892,500.
In February 2023, the brothers tried to dismiss the SEC lawsuit, arguing that the digital assets involved didn't qualify as "securities." However, their motion to dismiss was delayed until June 15th to allow for settlement negotiations, as noted in a blog post and recent stipulation.
This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.