Former Coinbase Executive Denies Claims of Insider Trading
- Insider trading involves leaking vital information about a company’s product to outsiders who then make financial decisions.
Ishan Wahi, a former product manager for Coinbase Global, who was charged with insider trading by the United States Law Enforcement and Securities and Exchange Commission, reportedly pleaded not guilty to two counts of wire fraud conspiracy and two counts of wire fraud.
Ishan was arrested by authorities in May as he attempted to depart the United States for India. Regulators accused him of disclosing private information regarding cryptocurrencies that Coinbase planned to list for trading to his brother Nikhil and friend Sameer Ramani. This inside information enabled both parties to buy and sell the assets before they were listed on Coinbase. As a result, Nikhil and Sameer made a profit of at least $1.5 million. Authorities have since arrested Nikhil, but Sameer’s whereabouts remain unknown.
According to the prosecutors, Nikhil and Seemer purchased the assets using Ethereum blockchain wallets and traded at least 14 times before Coinbase’s announcements. However, Ishan’s defense team is putting up a strong argument to keep him out of jail.
The 32-year-old’s attorney, David Miller, argued that the charges should be dropped since insider trading requires the use of securities or commodities, which is not the case with his client. Additionally, Miller claimed that Coinbase tested new coins before publicly listing them, demonstrating that the information his client was charged with disclosing was not private.
What is Insider Trading?
Insider trading occurs when a person makes trades based on private information from an employee of a firm. In stock investing, the law frowns at insider trading, especially for firms registered with the SEC. There have been a few significant cases of insider trading involving major crypto firms in recent weeks.
Although the majority of cryptocurrencies don’t fall within the SEC’s definition of investments, it appears that SEC-registered assets are not the only ones to which insider trading laws apply. In early June, the Department of Justice announced that it would file charges against Nathaniel Chastain of OpenSea for secretly purchasing some of the NFTs that would be displayed on OpenSea’s homepage. Nathaniel reportedly took in huge profits through his actions. However, he could not avoid the claws of the law.
According to U.S. Attorney Damian Williams,
NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself. Today’s charges demonstrate the commitment of this Office to stamping out insider trading — whether it occurs on the stock market or the blockchain.
Insider trading in the stock market or crypto field creates an unfair playing field and can harm regular investors, which is why the SEC cracks down on it severely. Essentially, insider trading undermines confidence in the NFT and cryptocurrency markets. Users are left unsure about the genuineness of crypto or NFT prices. However, many crypto exchanges allegedly claim to have procedures in place to spot and prevent insider trading. However, these measures do not seem to be playing an effective role for now.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
