Last April, potential insider trading was spotted on the Coinbase platform. Following this, the latter investigated to identify three suspects, including one of its employees. The latter has been fired and all three are now facing justice in the US.
Coinbase investigated insider trading
Earlier this year, the Coinbase platform was the subject of rumours of insider trading. The exchange took the matter seriously and conducted an investigation. It emerged that an employee was indeed passing on confidential information to his brother and a friend. The employee in question was subsequently dismissed and Coinbase reported its findings to the courts.
Brian Armstrong, CEO of Coinbase, made a point of stating on his Twitter profile that his company was actively monitoring any illegal activity:
1/ At Coinbase, we actively monitor for illegal activity and investigate any alleged misconduct. In April, we received information about possible frontrunning of assets shortly before being listed on Coinbase. We immediately launched an investigation into this.
– Brian Armstrong – barmstrong.eth (@brian_armstrong) July 21, 2022
Ishan Wahi, former product manager at Coinbase, and his brother Nikhil Wahi were arrested yesterday in Seattle. Their accomplice, Sameer Ramani, has also been charged, but remains at large. All three are charged with using confidential Coinbase information to commit insider trading in the crypto-assets that are to be traded. They each face up to a maximum of 20 years in prison.
A case highlighted by social networks
It was crypto influencer Cobie who noticed suspicious coincidences in April this year on the activity of a wallet. Indeed, an address had acquired some tokens for several hundred thousand dollars, 24 hours before Coinbase announced that they would potentially be listed on the platform.
According to the investigation, the three individuals repeated their misdeed on 14 occasions on 25 different assets. The events took place between June 2021 and April 2022, generating an estimated unrealised gain of $1.5 million.
Michael J. Driscoll, deputy director of the Federal Bureau of Investigation (FBI) in New York, who also followed a similar case for OpenSea, commented:
Although the allegations in this case involve trading on a crypto exchange, rather than on a more traditional financial market, they still constitute insider trading. […] Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets, old and new. “
On May 16, Ishan Wahi was summoned to a meeting by Coinbase’s Director of Security Operations as part of the investigation. The suspect then attempted to flee to India the day before the meeting and was apprehended by law enforcement before boarding the plane.
This investigation shows that in the face of the apparent anonymity of our ecosystem, which is often questioned by politicians, a person’s activity on the blockchain always leaves traces. In this case, it was the public nature of Ethereum (ETH), which allowed the community to reveal a crime that might have gone unnoticed in traditional finance.
