The Indian brothers – Ishan Wahi, former product manager at Coinbase, and Nikhil Wahi – were arrested Thursday morning in Seattle
The accused were charged with wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading
Ishan Wahi allegedly tipped off his brother and friend or associate Ramani confidential information about forthcoming announcements
In the first cryptocurrency insider trading case in the US, a former Coinbase product manager and his brother, along with a Houston man, have been charged. The Indian brothers – Ishan Wahi, a former Coinbase employee, and Nikhil Wahi – were arrested Thursday morning in Seattle, Washington. The third accused, Sameer Ramani, remains at large.
The accused were charged with wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in cryptocurrency assets by using confidential Coinbase information about which crypto assets were scheduled to be listed on Coinbase’s exchanges, US prosecutors said in a statement.
As per the statement, Ishan Wahi tipped off his brother and friend or associate Ramani confidential information about forthcoming announcements of new cryptocurrency assets that Coinbase would allow users to trade through its exchange so that they could place profitable trades in those crypto assets ahead of Coinbase’s public listing announcements.
After getting tips, they would allegedly use anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced that it was listing or considering listing those crypto assets on its exchanges. Following Coinbase’s public listing announcements, they would sell the crypto assets for a profit.
US Attorney Damian Williams said that the charges are a further reminder that Web3 is not a law-free zone. Just last month, the first ever insider trading case involving NFTs was discovered. “Our message with these charges is clear: fraud is fraud , whether it occurs on the blockchain or on Wall Street,” Williams said.
While Wahi and Ramani purchased and sold at least 25 crypto assets for a profit, nine of those were identified as securities, the US Securities and Exchange Commission (SEC) said, as per a Reuters report.
With regards to the claim on securities, Coinbase has pushed back saying it offers unregistered securities. “Seven of the nine assets included in the SEC’s charges are listed on Coinbase’s platform. None of these assets are securities,” Paul Grewal, chief legal officer at Coinbase, said in a blogpost.
The charges put a spotlight on an important problem that the US doesn’t have a clear or workable regulatory framework for digital asset securities, Grewal added.
“And instead of crafting tailored rules in an inclusive and transparent way, the SEC is relying on these types of one-off enforcement actions to try to bring all digital assets into its jurisdiction, even those assets that are not securities,” he said.
If a digital asset should be considered as security and come under the SEC’s purview remains a conflicting area in the US. However, the SEC usually considers digital assets as security based if they constitute an “investment contract”.
Crypto Policy Uncertainty In India
In India, crypto regulation is a grey area. The Reserve Bank of India (RBI) has always opposed cryptos and even recommended the government that it should frame regulations for cryptocurrencies and prohibit them.
The RBI is of the view that cryptocurrencies should be prohibited, Finance Minister Nirmala Sitharaman said earlier this week.
“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” the FM said.
Besides, India has also seen a large number of crypto scams. The GainBitcoin scam is estimated to be worth at least INR 90,000 Cr with over 1 Lakh victims. Earlier, cryptocurrency investment platform BitConnect founder Satish Kumbhani was indicted in the US for orchestrating a global Ponzi scheme worth $2.4 Bn.
