Former Coinbase Manager and His Brother Agree to Settle Insider Trading Charges Relating to Crypto Asset Securities

The U.S. Securities and Exchange Commission (SEC) revealed that Ishan Wahi, a former product manager at Coinbase, and his sibling, Nikhil Wahi, have consented to resolve allegations of insider trading. Their trading activities were purportedly timed strategically before numerous announcements of new crypto assets listings on the Coinbase platform.

Both of the Wahi brothers agreed to a permanent prohibition from breaching Section 10(b) of the Securities Exchange Act and Rule 10b-5, in addition to forfeiting their ill-gotten profits plus prejudgment interest. Given that a criminal court has already ordered the brothers to relinquish their ill-gotten earnings, the SEC’s disgorgement and prejudgment interest could be considered fulfilled by the court-approved forfeiture of the brothers’ assets in the criminal case. Therefore, the SEC has chosen not to seek additional civil penalties, considering the brothers’ prison sentences.

A complaint was lodged by the SEC on July 21, 2022, in the U.S. District Court for the Western District of Washington. The allegation was that Ishan Wahi, while working at Coinbase, played a role in preparing the public listing announcements, which included the names of crypto assets that would be listed for trading. Coinbase regarded this information as confidential and cautioned its employees against trading or sharing such information. Despite these warnings, Ishan allegedly tipped his brother, Nikhil Wahi, and his friend, Sameer Ramani, about the timing and content of forthcoming announcements from June 2021 to April 2022. These insider tips allowed Nikhil Wahi and Ramani to allegedly buy at least 25 crypto assets (nine of which were securities) ahead of these announcements, and then sell them post-announcement for a profit. As part of the settlement, the Wahi brothers will not dispute the SEC’s allegations.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, commented, “Though the technologies involved in this case may be cutting-edge, the alleged misconduct is not. The Wahi brothers are accused of sharing and trading securities based on undisclosed material information, a classic example of insider trading. Neither crypto asset securities nor the SEC provide immunity against insider trading. I extend my gratitude to the SEC staff for their efforts in resolving this case.”

Contingent on the court’s approval, the Wahi brothers have consented to final judgments that perpetually bar them from breaching Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In a separate criminal case, the brothers pleaded guilty to conspiracy to commit wire fraud. Ishan Wahi received a 24-month prison sentence and was ordered to forfeit 10.97 ether and 9,440 Tether, while Nikhil received a 10-month prison sentence and was ordered to forfeit $892,500.

The SEC’s investigation was spearheaded by Michael Brennan, Jennie B. Krasner, and Gregory Padgett, with support from Patrick McCluskey, Sejal Bhakta, and Donald Battle. The case was overseen by Paul Kim, Joseph Sansone, and Carolyn M. Welshhans. The litigation was led by Daniel Maher and Peter Lallas and supervised by Olivia Choe. The SEC expressed appreciation for the help of the U.S. Attorney’s Office for the Southern District of New York and the FBI.