An insider trading case filed by the Securities and Exchange Commission (SEC) on Thursday argues that a Coinbase Global Inc. employee passed tips about the timing and content of Coinbase’s “listing announcements” to his brother and friend, resulting in their obtaining at least $1.1 million in illicit profits. The company, a cryptocurrency asset trading platform, apparently flagged the activity before defendant Ishan Wahi (Ishan), a Coinbase employee, unsuccessfully attempted to leave the country.
The civil complaint centers on three Indian nationals, defendants Ishan, his brother Nikhil Wahi (Nikhil), and close friend Sameer Ramani, who attended the University of Texas at Austin at the same time Ishan did and purportedly remains a close friend. Ishan worked as manager in Coinbase’s Assets and Investing Products group, the complaint says.
The suit details how between June 2021 and April 2022 Ishan tipped his brother and friend about trading in at least nine crypto asset securities. The complaint specifies that Ishan did so using a non-U.S. phone number, at one point receiving a message containing a dollar sign and “the eyes” emoji from Nikhil.
The SEC says that Coinbase flagged the brother and friend’s suspicious trading and sought to speak with Ishan. Faced with an interview about “an ongoing company investigation into Coinbase’s asset listing process,” Ishan sent a screenshot of the interview request to both Nikhil and Ramani, stating that he needed to speak with them urgently.
The interview was scheduled for May 16, 2022 with Coinbase’s legal department, but prior to the interview, Ishan emailed co-workers that he would be “out indefinitely” because he “had to fly back to India overnight.” Ishan was subsequently blocked from leaving the country by law enforcement.
The complaint states claims against all three defendants, Ishan for tipping and the other two for trading, and seeks disgorgement and civil penalties. The civil case is proceeding in Seattle, Wash., while the SEC’s criminal case is proceeding in the Southern District of New York. The recently unsealed indictment charges all three defendants with conspiracy to commit wire fraud.
According to Tweets by Coinbase, the company investigated possible wrongdoing and cooperated with the SEC. CEO Brian Armstrong’s latest Tweet said, “[t]his is a great reminder for everyone in crypto, and at Coinbase, that frontrunning is illegal and erodes trust. We will investigate and refer bad actors to law enforcement, and they will face real legal consequences including serving prison time.” Contrastingly, Coinbase’s chief legal counsel Paul Grewal tweeted that “Coinbase doesn’t list securities. Period.”