Wahi brothers settle crypto insider trading case with SEC

Wahi brothers, the siblings involved in the first-ever crypto insider trading case, have reportedly reached a settlement with the U.S. Securities and Exchange Commission.

The regulatory agency announced Tuesday that former Coinbase product manager Ishan Wahi (32) and his brother Nikhil Wahi (27) had agreed to admit that the assets they sold were securities and not to contest the SEC’s additional allegations.

“While the technologies at issue in this case may be new, the conduct is not,” said the SEC’s Division of Enforcement director Gurbir S. Grewal.

The case stems from accusations made by the SEC last year that the Wahi brothers, along with their friend Sameer Ramani, were engaging in insider trading with crypto-assets deemed securities.

Specifically, the brothers purportedly made substantial profits by utilizing Ishan’s position at Coinbase to gain early access to upcoming assets before their listing on the prominent U.S.-based crypto exchange.

According to prosecutors, the Wahi brothers and Ramani collectively earned over $1.5 million through their investments in new digital assets. By leveraging Ishan’s insider knowledge, they strategically bought and swiftly sold the assets, capitalizing on their rapid increase in value. The illicit scheme allowed them to amass significant gains for themselves and their associates.

“We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple,” said Grewal.

The court also ordered both individuals to forfeit ill-gotten gains, including 10.97 Ethereum (equivalent to $20,926), $9,440 worth of the stablecoin Tether and $892,500 in cash.

While the criminal court imposed penalties on the brothers, the SEC has decided not to pursue further civil penalties against them. The regulatory agency explained that they refrained from seeking additional fines due to the prison sentences already imposed on the Wahi brothers. Ishan is facing a two-year sentence, while Nikhil is serving a 10-month sentence after pleading guilty to wire fraud conspiracy.

The SEC noted, “As is often the case when a criminal court has already ordered defendants to forfeit their ill-gotten gains, Wahi would not be hit with more civil penalties on top of what he’d already paid.”

Meanwhile, Ramani, the third individual implicated in the case, still remains at large.

Rodrigo

2023-06-01 05:17

Today’s SEC settlement (i) doesnt admit any legal conclusions about the security status of tokens; (ii) doesnt require Wahi to pay any additional penalties (in addition to those due for separate criminal case); and (iii) includes immaterial injuction not to violate Section 10(b) https://t.co/qHOfcaIVk2

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First crypto insider trading case

This case is the first instance showing that significant financial gains can be made by leveraging inside knowledge within the crypto market, according to the prosecutors.

Charges related to the insider trading scheme were brought against the three individuals in July of the previous year. Ishan and Nikhil would then plead guilty to two counts of conspiracy to commit wire fraud in the high-profile insider trading case earlier this year.

The charges were brought against the brothers by prosecutors in the Southern District of New York. Previously, Ishan had pleaded not guilty to wire fraud charges but changed his plea in February.

The SEC alleged that at least nine of the 25 tokens involved in the case qualify as securities. Wahi’s attorneys then filed a motion to dismiss the agency’s case, arguing that tokens traded on the secondary market should not be considered securities.

The court filing argued against expanding the SEC’s jurisdiction over the digital asset space without input from Congress and claimed that the securities laws should not be extended to the cryptocurrency industry.