First cryptocurrency insider-trading case yields 10-month prison term

Reuters
Reuters

Summary

  • Brother of former Coinbase employee is sentenced after pleading guilty to fraud

The brother of a former Coinbase Global Inc. employee was sentenced in a New York federal court Tuesday to 10 months in prison for his role in what prosecutors called the first cryptocurrency insider-trading scheme.

Nikhil Wahi, 27 years old, pleaded guilty last year to one count of conspiring to commit wire fraud, admitting to profiting from confidential information that federal prosecutors say his brother obtained about assets to be listed on the crypto exchange. Mr. Wahi netted nearly $900,000 in proceeds by using the information to trade on digital tokens, according to prosecutors in the Manhattan U.S. attorney’s office.

Mr. Wahi, his brother and a friend were charged in the alleged scheme last summer. The brother, Ishan Wahi, who worked on Coinbase’s asset-listing team, previously pleaded not guilty to four counts of fraud and conspiracy charges and is awaiting trial. Coinbase said last year that it had fired Ishan Wahi. A lawyer for Ishan Wahi declined to comment.

The friend, Sameer Ramani, remains at large, according to prosecutors.

U.S. District Judge Loretta Preska said in handing down the sentence that Nikhil Wahi made about 40 trades and tried to conceal the illicit proceeds using anonymous crypto wallets.

“The defendant knew it was wrong and did not see it as a no-harm, no-foul course of conduct," she said. He must also pay $892,500 in forfeiture, she said.

Mr. Wahi, who is from India, faces deportation after his prison term. He had sought a nonprison sentence, telling the judge that his actions were driven by his guilt and stress over his parents spending their savings on his college education in the U.S. He had hoped to use the ill-gotten proceeds to provide them with a comfortable retirement and to help cover the costs of his father’s declining health, he said.

“I understand my actions are wrong and that is something I will have to live with forever," he said.

Prosecutors had sought a prison term of 10 to 16 months, citing the frequency of his trades.

“It’s not a case of an isolated error of judgment," Assistant U.S. Attorney Noah Solowiejczyk told the judge. “It’s doing it over and over and over."

Mr. Solowiejczyk said that imprisonment would deter others in the crypto industry from participating in insider trading. Judge Preska agreed that a prison term was necessary for public deterrence, though not because of the novelty of the case involving cryptocurrency.

“Insider trading is fraud plain and simple," she said.

Manhattan U.S. Attorney Damian Williams has aggressively pursued crypto-related crimes over the past year. His office’s efforts are part of a broader push by federal regulators to police digital tokens.

Last month Mr. Williams’s office charged FTX founder Sam Bankman-Fried with stealing billions of dollars from customers of the collapsed crypto exchange while defrauding investors and lenders to his crypto-investment firm Alameda Research. Mr. Bankman-Fried has pleaded not guilty. Prosecutors have also secured the cooperation of two former associates of Mr. Bankman-Fried, who have pleaded guilty to fraud and conspiracy charges.

In June, Mr. Williams’s office charged a former employee of the nonfungible-token marketplace OpenSea with fraud and money laundering in what prosecutors said was the first case to involve insider trading of the digital assets. The defendant, Nathaniel Chastain, has pleaded not guilty and is awaiting trial.

This story has been published from a wire agency feed without modifications to the text

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