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The Securities and Exchange Commission (SEC) revealed on Tuesday that former Coinbase manager Ishan Wahi and his sibling, Nikhil Wahi, have consented to resolve allegations of insider trading based on information obtained from the exchange.
The former is required to forfeit 10.97 ETH ($20,848.92) and 9,440 USDT, while the latter must forfeit $892,500.
The Conclusion of Crypto’s Initial Insider Trading Case
As stated in the SEC’s press release, the fines imposed on the brothers serve as penalties for the recovery of illicit profits from their trading activities, along with prejudgment interest.
The brothers, along with one of their associates, Sameer Ramani, were indicted by the Department of Justice in July 2021 in the first-ever insider trading case related to cryptocurrencies. Specifically, Ishan Wahi was alleged to have informed his brother and friend about coins that were set to be listed on Coinbase, allowing them to purchase these assets prior to public listing announcements.
“Coinbase regarded such information as confidential and cautioned its employees against trading based on, or sharing, that information,” the SEC clarified.
Analysis has indicated that public listings on prominent exchanges generally have a significantly positive effect on a coin’s price. Prosecutors claimed that the co-conspirators gained $1.5 million from 55 distinct token trades between June 2021 and April 2022.
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Although Ishan Wahi initially contested the charges against him, he eventually pleaded guilty to two counts of conspiracy to commit wire fraud in February. His brother had already done the same in September, expressing regret that his actions were “something that I will have to live with forever.”
Consequences from the SEC
Both brothers agreed to acknowledge the SEC’s allegations as part of the settlement agreement.
While Nikhil paid the larger fine, he will serve only 10 months in prison, compared to his brother’s 2-year sentence.
The SEC stated that at least nine of the assets acquired by the group “were securities,” contradicting Coinbase’s assertions that the exchange does not list any securities. Ishan Wahi’s attorneys disputed these claims in February, and Coinbase continues to engage in a dispute with the agency regarding the legal classifications of cryptocurrencies overall.
“The federal securities laws do not exempt crypto asset securities from the prohibition against insider trading, nor does the SEC,” stated Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in the agency’s announcement. “I appreciate the SEC staff for their successful efforts in resolving this matter.”
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