Coinbase tossed an employee accused of insider trading to the FBI.
“Once we collected sufficient evidence to be confident in our suspicions, we provided information about these individuals to the DOJ and terminated our employee. On July 21, 2022, the DOJ criminally charged these individuals with committing wire fraud and wire fraud conspiracy in connection with misusing Coinbase confidential information about asset listings,” the company wrote in a blog post on Thursday.
Ishan Wahi, a former product manager at Coinbase, is accused by the Justice Department of tipping off his brother and a friend on when the exchange planned to list cryptocurrencies—which included the tokens AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX and KROM. Wahi’s alleged co-conspirators are said to have moved these cryptos through multiple anonymous Ethereum wallets, before cashing them out via centralized exchanges for $1.5 million in payouts. The indictment marks the first time the Securities Exchange Commission (SEC) has applied insider trading laws to cryptocurrency.
“Today’s charges are a further reminder that Web3 is not a law-free zone,” said U.S. Attorney Damian Williams. “Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them.”
Coinbase applauded the FBI’s arrest of its former employee, who had bought a one-way ticket to India when contacted by the company’s security operations. However, the company took issue with the Justice Department’s characterization of the cryptocurrencies in question as “securities.”
“No assets listed on our platform are securities, and the SEC charges are an unfortunate distraction from today’s appropriate law enforcement action,” said Coinbase.
Coinbase has a fraught relationship with the SEC over the security question. Last fall, CEO Brian Armstrong accused the government agency of “really sketchy behavior” after it allegedly threatened to sue Coinbase for a new lending feature.