Last April, a 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 was fired and all three are now dealing with American justice.
Coinbase investigated insider trading
Earlier this year, the platform Coinbase had been rumored to insider trading. Wishing to dispel all suspicion, the exchange then took the matter seriously by conducting an investigation. It emerged that an employee was indeed communicating confidential information to his brother and a friend. The employee in question was subsequently fired and Coinbase report their results to the court.
Brian Armstrong, CEO of Coinbase made a point of exposing the facts on his Twitter profile, stating that his company actively monitored 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, as well as his brother Nikhil Wahi, were therefore arrested yesterday in Seattle. Their accomplice, Sameer Ramani, is also charged, but still free. All three are being prosecuted for using confidential Coinbase information to commit insider trading in the crypto-assets to be listed. They each risk up to one maximum of 20 years imprisonment.
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A case highlighted by social networks
It was crypto influencer Cobie who noticed suspicious coincidences last April on portfolio activity. Indeed, an address had acquired certain tokens for several hundred thousand dollars, 24 hours before Coinbase announced that these would be potentially listed on the platform.
According to the investigation, the three individuals would have repeated their wrongdoing to 14 takeovers on 25 different assets. The events took place between June 2021 and April 2022, to generate unrealized capital gain estimated at $1.5 million.
Michael J. Driscoll, Deputy Director of Federal Bureau of Investigation (FBI) in New York, which also followed a similar case for OpenSea, spoke on the subject:
“While the allegations in this case relate to transactions made on a crypto exchange, rather than 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 called 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 interview and was apprehended by law enforcement before boarding.
This survey shows that given the apparent anonymity of our ecosystem, often questioned by politicians, the activity of a person on the blockchain always leaves traces. Here, it is moreover the public nature of Ethereum (ETH), which allowed the community to reveal a crime which, perhaps, would have gone unnoticed in traditional finance.
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Source: United States Department of Justice
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