The U.S. Department of Justice released a statement on September 12 reporting that Nikhil Wahi, brother of ex-Coinbase product manager Ishan Wahi, pleaded guilty to committing cryptocurrency wire fraud using insider information sourced from his brother.
Per the release, Nikhil Wahi faces up to 20 years of possible jail time. In addition, he will have to forfeit all unlawfully obtained monetary gains.
Ishan Wahi, on the other hand, pleaded not guilty in early August to the charge of cryptocurrency wire fraud; however, his brother’s plea could put a negative spin on his case.
The First Person to Plead Guilty to Cryptocurrency Wire Fraud
U.S. Attorney Damian Williams said this is the first time in history that a person accused of cryptocurrency insider trading has pled guilty as charged.
“Nikhil Wahi admitted in court today that he traded in crypto assets based on Coinbase’s confidential business information to which he was not entitled. For the first time ever, a defendant has admitted guilt in an insider trading case involving the cryptocurrency markets.”
According to Williams, this case should serve as a reminder to all crypto traders to think twice before engaging in any fraudulent activity.
“The Southern District of New York will continue to steadfastly police frauds of all stripes and will adapt as technology evolves.”
Coinbase Did All It Could To Prevent And Deal With The Issue
As reported by CryptoPotato, the Wahi brothers were arrested in July following an investigation by U.S. authorities in conjunction with Coinbase. The investigation concluded that the brothers took advantage of Nikhi Wahi’s position as a manager at Coinbase to make investments in cryptocurrencies before they were listed on the platform.
Since July 2021, Nikhil Wahl had been using his brother’s insider information to buy cryptocurrencies before they were listed on Coinbase to sell them once public listing announcements were made, benefiting from the famous “Coinbase effect.”
Coinbase warned its employees that sharing the listing information with anyone was strictly forbidden. It even forbade them from giving investment “tips” to their acquaintances. Therefore, Ishan was aware of his crime before he was arrested.
Nikhil used accounts in other people’s names on centralized exchanges to cover his tracks. In addition, according to authorities, he had created multiple wallets through the Ethereum blockchain without any history to hide his information, but investigators were able to track down all his transactions.
Coinbase has a long-standing relationship with U.S. authorities. In addition to being the first publicly traded cryptocurrency exchange ever, it has developed a variety of software tools that are used by multiple U.S. government agencies. The Wahi Brothers scandal is a stain on the platform’s track record, but the speed of action to remove Wahi from his position and cooperate with the authorities may play to the exchange’s reputation.
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