Cryptocurrency Insider-Trading Case Leads to 10-Month Prison Term

The brother of a former Coinbase employee has been charged with insider trading. An employee of Global Inc. was sentenced to 10 months in prison by a New York federal court on Tuesday for his part in what prosecutors have called the first cryptocurrency insider-trading scheme.

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Nikhil Wahi, 27 years old, pleaded guilty last year to one count of conspiring to commit wire fraud. He admitted to profiting from confidential information that federal prosecutors say his brother obtained about assets to be listed on the crypto exchange. Mr. Wahi used the information to trade on digital tokens, according to prosecutors in the Manhattan U.S. attorney’s office. He netted nearly $900,000 in proceeds from the trades.

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Last summer, Mr. Wahi and his brother were charged in an alleged scheme. His brother, Ishan Wahi, who worked on Coinbase's asset-listing team, pleaded not guilty to four counts of fraud and conspiracy charges and is awaiting trial. Coinbase said it had fired Ishan Wahi last year. A lawyer for Ishan Wahi declined to comment.
Sameer Ramani, the friend of the accused, remains at large, according to prosecutors.

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U.S. District Judge Loretta Preska said that Nikhil Wahi made approximately 40 trades and attempted to conceal the illicit proceeds by using anonymous crypto wallets.
"The defendant knew that what they were doing was wrong and did not see it as a harmless act," she said. They must also pay $892,500 in forfeiture, she said.
Mr. Wahi, who is from India, faces deportation after his prison term. He had sought a nonprison sentence, telling the judge that his actions were driven by his guilt and stress over his parents spending their savings on his college education in the U.S. He had hoped to use the ill-gotten proceeds to provide them with a comfortable retirement and to help cover the costs of his father’s declining health, he said.

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Assistant U.S. Attorney Noah Solowiejczyk told the judge that the defendant's repeated errors in judgment showed a pattern of behavior, not just isolated incidents.
Mr. Solowiejczyk argued that a prison sentence would deter others in the cryptocurrency industry from engaging in insider trading. Judge Preska agreed that a prison term was necessary for public deterrence, though not because of the novelty of the case involving cryptocurrency.

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"Insider trading is a form of fraud that is both illegal and unethical," she said. "It's a form of cheating that gives some investors an unfair advantage over others, and it needs to be stopped."

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Manhattan U.S. Attorney Damian Williams has been aggressive in pursuing crypto-related crimes over the past year. His office's efforts are part of a broader push by federal regulators to police digital tokens.

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Last month, Mr. Williams' office charged FTX founder Sam Bankman-Fried with stealing billions of dollars from customers of the collapsed crypto exchange while defrauding investors and lenders to his crypto-investment firm Alameda Research. Mr. Bankman-Fried has pleaded not guilty. However, prosecutors have secured the cooperation of two former associates of Mr. Bankman-Fried, who have both pleaded guilty to fraud and conspiracy charges. This provides strong evidence against Mr. Bankman-Fried in the upcoming trial.

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In June, Mr. Williams' office filed charges against a former employee of the nonfungible-token marketplace OpenSea for fraud and money laundering. This is believed to be the first case involving insider trading of digital assets. The defendant, Nathaniel Chastain, has pleaded not guilty and is awaiting trial.