An observant Twitter user tracking cryptocurrency trades may have helped federal officials bring charges against three men accused of over $1m of insider trading on the popular crypto exchange platform Coinbase.
On Thursday, the Department of Justice announced charges against three men: brothers Ishan Wahi, 32, of Seattle, a former product manager at Coinbase; his brother, Nikhil Wahi, 26; and Sameer Ramani, an associate.
Together, they allegedly used company information about when various cryptocurrencies would be listed on Coinbase to make trades in advance of an expected price bump. They earned an estimated $1.5m in the process.
Coinbase is the most important US crypto exchange platform, and the US is the most dynamic crypto market in the world, so a listing on the platform is often a surefire way for a digital currency to boost its price.
"Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street," US Attorney Damian Williams said in a statement to the Washington Post.
The case, which was investigated in partnership with the Securities and Exchange Commission, is the first insider-trading case involving crypto markets.
Officials arrested the Wahi brothers in Seattle on Thursday morning.
Ishan Wahi’s attorneys told Law.com he “is innocent of all wrongdoing and intends to defend himself vigorously.”
Mr Ramani remains at large.
According to court filings from prosecutors, the trio allegedly used a private chat to communicate about crypto listings that Ishan Wahi became aware of. The group allegedly traded in tokens like TRIBE, XYO, ENS, and POWR as a result of such conversations, and used a string of accounts and anonymous digital wallets to hide their trades. Their activities were eventually noticed.
Jordan Fish, who goes by @cobie on Twitter and is influential in the crypto space, said in an April post he had spotted a crypto account that “bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl.”
Later that month, Coinbase said it was investigating leaks at the company.
In May, the company told Ishan Wahi he needed to come in for an in-person meeting, prompting him to book a one-way flight to India scheduled to leave the next day, according to officials.
The company eventually fired Mr Wahi, and said it provided information from its internal investigations to the DOJ.
“Coinbase takes allegations of improper use of company information very seriously, as demonstrated by our rapid investigation of this matter,” the company said.
