A former employee of the Coinbase cryptocurrency exchange pleaded guilty on Tuesday to insider trading, the first time a crypto industry insider has admitted to trying to profit from confidential information.
The case has been closely watched in the crypto industry since the charges against Ishan Wahi, a former Coinbase product manager, were filed in July in federal court in the Southern District of New York. By cracking down on insider trading at a major exchange, the federal authorities signaled a willingness to pursue the freewheeling crypto industry for the same type of malfeasance that occurs in traditional financial markets.
Mr. Wahi, who admitted to two counts of conspiracy to commit wire fraud, is scheduled to be sentenced on May 10. Each count carries a maximum sentence of 20 years in prison, though federal guidelines often result in shorter sentences.
“Whether it occurs in the equity markets or the crypto markets, stealing confidential business information for your own personal profit or the profit of others is a serious federal crime,” Damian Williams, the U.S. attorney for the Southern District of New York, said in a statement.
A lawyer for Mr. Wahi declined to comment. A Coinbase spokeswoman said the company “takes allegations of improper use of company information with the utmost seriousness.”
Mr. Wahi, 32, began working on Coinbase’s asset listings team around October 2020. That gave him access to information about which cryptocurrencies the company would offer on its platform.
According to prosecutors, Mr. Wahi provided information about listings to his brother, Nikhil Wahi, and his brother’s friend Sameer Ramani so they could secretly engage in profitable trades. The price of a cryptocurrency often increases when a major exchange like Coinbase announces plans to list it.
In total, Mr. Wahi and the other two men were involved in trades that used information about 14 listings, generating about $1.5 million in illegal profits, according to prosecutors.
Last month, Nikhil Wahi was sentenced to 10 months in prison for his role in the scheme. Mr. Ramani has also been charged.
The insider trading case is part of a growing crackdown on the crypto industry by the federal authorities. One of the assistant U.S. attorneys who prosecuted Ishan Wahi, Nicolas Roos, is also spearheading the office’s expanding case against Sam Bankman-Fried, the disgraced founder of the FTX crypto exchange.