Ishan Wahi, a former product manager for Coinbase Global Inc (COIN.O), was given a two-year prison term on Tuesday in what U.S. prosecutors have dubbed the first insider trading case involving cryptocurrencies.
Ishan Wahi, 32, was sentenced in federal court in Manhattan by U.S. District Judge Loretta Preska after he admitted guilt to two charges of conspiring to commit wire fraud in February.
During the sentence hearing, Preska stated that the scheme entailed a “massive abuse” of Coinbase’s trust and that attempts to hide it proved Wahi and his co-defendants were aware of the wrongness of their deeds.
It is one of a number of well-known cryptocurrency-related prosecutions that U.S. prosecutors have launched in New York, including one against Sam Bankman-Fried, the founder of FTX, who has pleaded not guilty.
According to the prosecution, Wahi communicated secret knowledge about which digital assets will be listed on Coinbase, one of the biggest cryptocurrency exchanges in the world, with his brother Nikhil and their mutual acquaintance Sameer Ramani.
Prosecutors claim that between June 2021 and April 2022, the three individuals traded 55 digital assets for $1.5 million before the listing notifications were made public.
Nikhil Wahi was charged with conspiring to commit wire fraud in September and entered a guilty plea. In January, he was given a 10-month prison term. Ramani has not been located.
Ishan Wahi expressed regret for his acts and their impact on his friends and family, some of whom were present in court, during the hearing on Tuesday.
Wahi stated, “I made a terrible mistake that will haunt me for the rest of my life.
During the hearing, Assistant U.S. Attorney Noah Solowiejczyk stated that Wahi’s actions were “not a one-off mistake” but rather a series of tips over a period of ten months.
Citing prior insider trading cases that had ended in minimal or no prison time, Wahi had argued in court documents for a sentence that was less severe than his brother’s.
Ishan Wahi has been sentenced to more than three years in prison by the prosecution in an effort to dissuade other cryptocurrency insiders from exploiting proprietary information.
Regardless of the type of asset involved, prosecutors have the right to file a fraud charge in cases where deception was employed to pursue financial benefit. This offers the U.S. Justice Department more freedom than its civil counterpart, the U.S. Securities and Exchange Commission, which is restricted to overseeing the securities markets, to pursue crypto-related wrongdoing.
The SEC has maintained that many digital assets constitute securities in court cases, including one it brought against Ishan and Nikhil Wahi for their dealings. According to court documents, Ishan Wahi and the SEC have reached an understanding in principle to resolve the claims, and Nikhil Wahi and the SEC are also in settlement negotiations.
As of right now, Coinbase does not list any securities.