The U.S. Justice Department announced that a former product manager at Coinbase was arrested. He was charged with insider trading in cryptocurrency tokens. The SEC filed a separate case regarding the matter, signaling the start of a major battle against crypto firms over what security should be classified.
A press release stated that Ishan Wahi, a former Coinbase employee, and Nikhil Wahi were both arrested. However, Sameer Ramani, their friend, was still being sought. Ishan Wahi was charged with two counts each of wire fraud conspiracy, and two counts each of wire fraud. Sameer Ramani and Nikhil Wahi were each charged with one count each of wire fraud conspiracy.
Although the DOJ charges don’t include securities fraud charges, it is interesting to note that separate charges were filed by SEC. A number of assets traded by this group are classified as crypto asset securities. This classification will have wide-reaching implications if it holds.
The SEC specifically framed the following assets in securities: Power Ledger’s POWR token Flexa’s AMP token Rally’s RLY token DerivaDEX’s DDX token XY Labs’ XYO token Rari Capital’s RGT token Liechtenstein Cryptoassets Exchange’s LCX token, DFX Finance’s DFX token and Kromatika Finance’s KROM token.
The SEC files a 62 page filing. It focuses on the listed firms and tokens.
A broadening classification of crypto assets as securities by the SEC could pose a serious threat to the industry. The crypto industry has been gaining momentum because of relaxed regulations surrounding commodities. Many insiders believe that tokens should be classified in this way. Coinbase responded to the suit by announcing they had filed a petition for new frameworks to govern crypto security rules.
These arrests are the result of a Twitter saga in which a crypto personality known as Cobie found a wallet that was used to purchase a variety of cryptocurrencies before Coinbase announced its listing.
The Justice Department’s investigation revealed that Wahi and his associates traded ahead of at least 14 Coinbase asset listings. They made gains of approximately $1.5 million. According to the press release, the group had bought cryptocurrencies through accounts owned by others and transferred funds to “multiple anonymous Ethereum blockchain wallets”. Coinbase contacted Ishan Wahi to arrange a meeting about the asset listing process. Wahi tried to flee the country after Coinbase had investigated the trades. However, he was stopped by law enforcement.
This arrest comes after the June arrest by OpenSea executive Nate Chastain who was also charged for insider trading in relation to NFTs. Also Read