Coinbase exec at heart of insider trading scandal pleads not guilty in federal court

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For­mer Coin­base Glob­al prod­uct man­ag­er Ishan Wahi plead­ed not guilty to two counts of wire fraud con­spir­a­cy and two counts of wire fraud in a Man­hat­tan fed­er­al court on Wednes­day, Reuters report­ed. Wahi has been accused by Unit­ed States law enforce­ment and the Secu­ri­ties and Exchange Com­mis­sion (SEC) of insid­er trad­ing while at Coin­base. He was arrest­ed in May as he attempt­ed to board a flight to India and was charged in July.

Specif­i­cal­ly, Wahi has been accused of pass­ing con­fi­den­tial infor­ma­tion to his broth­er Nikhil and friend Sameer Ramani regard­ing cryp­tocur­ren­cies Coin­base intend­ed to list for trad­ing. This alleged­ly allowed them to make a prof­it of at least $1.5 mil­lion between June 2021 and April 2022 by acquir­ing and trad­ing the assets in advance of their Coin­base list­ings. It was pos­si­bly the first insid­er trad­ing case involv­ing cryp­tocur­ren­cy. Nikhil Wahi has also been arrest­ed, but Ramani remained at large as of late July. 

The SEC is pur­su­ing a par­al­lel civ­il case against Ishan Wahi based on its deter­mi­na­tion that nine of the 25 cryp­tocur­ren­cies Wahi and his accom­plice trad­ed in — Pow­erledger (POWR), Kro­mati­ka (KROM), DFX Finance (DFX), Amp (AMP), Ral­ly (RLY), Rari Gov­er­nance Token (RGT), DerivaDAO (DDX), LCX, and XYO — were secu­ri­ties. The SEC’s move proved to be con­tro­ver­sial, as it led to ques­tions about the sta­tus of exchanges, funds, and investors who hold the assets. 

Relat­ed: Coin­base SEC inves­ti­ga­tion could have ‘seri­ous and chill­ing’ effects: Lawyer

The U.S. Depart­ment of Jus­tice did not include secu­ri­ties fraud among its charges in the case, and Coin­base force­ful­ly denied that it deals with secu­ri­ties in a blog post pub­lished after charges were filed against Wahi, with chief legal offi­cer Paul Gre­w­al writing:

“Instead of craft­ing tai­lored rules in an inclu­sive and trans­par­ent way, the SEC is rely­ing on these types of one-off enforce­ment actions to try to bring all dig­i­tal assets into its juris­dic­tion, even those assets that are not securities.”

Car­o­line Pham, com­mis­sion­er at the Com­mod­i­ty Futures Trad­ing Com­mis­sion, also joined in fray, call­ing the SEC case “a strik­ing exam­ple of ‘reg­u­la­tion by enforcement.’”

The SEC is report­ed­ly also look­ing at insid­er trad­ing in cryp­to exchanges in an inves­ti­ga­tion unre­lat­ed to this case.

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