Member of insider trading scheme to pay Coinbase $470k
Coinbase, one of the world’s largest cryptocurrency exchanges, went public in 2021. Robert Nickelsberg—Getty Images
Nikhil Wahi, a 27-year-old crypto trader whose brother worked for Coinbase, has agreed to pay $469,525.50 to the publicly traded cryptocurrency exchange for his role in an insider trading scheme.
The court filing, which was signed on April 6, was made public on Monday. In September, Wahi agreed to a plea deal with the Justice Department.
Lawyers for Nikhil did not immediately respond to a request for comment when contacted by Fortune. A spokesperson for the Department of Justice also did not respond, and Coinbase declined to comment.
“There are real consequences for illegal insider trading, wherever and whenever it occurs,” U.S. Attorney Damien Williams said in a statement after Nikhil was sentenced to 10 months in prison in January.
Nikhil’s restitution payment is the latest development in the fallout from an insider trading scheme that has potentially industry-wide ramifications. It is also the first time, the Department of Justice says, that insiders who exploited cryptocurrency markets have been successfully prosecuted.
In a separate civil case, the Securities and Exchange Commission has sued Nikhil, his brother, Ishan, and Sameer Ramani, another alleged member of the scheme, for violating the anti-fraud provisions of the securities laws.
From about June 2021 to April 2022, Ishan, the Coinbase CEO, conspired with Nikhil and Ramani — also not Coinbase employees — to buy up crypto tokens before they were listed on the exchange, according to the Justice Department’s first indictment.
Because of his position at Coinbase, Ishan knew when the exchange planned to list new cryptocurrencies. On several occasions he informed his brother and Ramani about the launch dates of the assets and they bought them in advance. When Coinbase announced these assets’ listings, their prices inevitably went up, given the exchange’s prominence in the industry, and the three conspirators sold them for a profit.
Ishan separately agreed to a plea deal with the Justice Department in February. His sentencing is scheduled for May 10. Ramani, as last reported by the DOJ, remains at large.
Coinbase, a victim in the criminal cases, has surprisingly come to the defense of Wahis and Ramani. Along with other blockchain boosters such as venture capital firm Paradigm, it has filed a “friend of the court” letter. They argue that the SEC has no jurisdiction to bring suit, as the tokens Nikhil Wahi and Ramani bought before they were listed on Coinbase fail the Howey test, a legal doctrine that evaluates whether an asset is a security.
The age-old debate over whether cryptocurrencies are securities has potentially existential implications for US-based crypto firms, which, if the SEC’s argument prevails, will be subject to increased regulatory scrutiny and a slew of potential fines.
