It Turns Out That Coinbase’s Former Manager Ishan Wahi And Two Other Individuals Recorded A $1,1 Million Illegal Profit

The U.S. Securities and Exchange Commission (SEC) made yet another move toward crypto exchanges and their operations, as, on July 21, the US Department of Justice (DOJ) indicted Ishan Wahi – a former Coinbase manager, along with his brother and a third individual – on insider trading charges. The move is a first in the crypto sector, especially in a publicly traded crypto company.

Insider trading at Coinbase?

The SEC claims that the defendants created a scheme to trade certain crypto assets before their public release, generating profit from the buzz around the public release. The SEC further clarified that Ishan Wahi helped coordinate Coinbase’s publicly traded announcements, including which cryptocurrencies or tokens would be available for public sale.

“In nearly a year, the defendants collectively earned over $1.1 million in illegal profits by engaging in an alleged insider trading scheme that repeatedly used material, nonpublic information to trade ahead of Coinbase listing announcements. As today’s case demonstrates, whether in equities, options, crypto assets, or other securities, we will vindicate our mission by identifying and combatting insider trading in securities wherever we see it.” Carolyn M. Welshhans, Acting Head of the SEC’s Crypto Assets Unit, noted.

Coinbase reacts

Back in April 2022, Coinbase made a change in the way assets were listed and announced for the second quarter of the year. However, the three defendants allegedly purchased the asset prior to the announcements.

“Following allegations of frontrunning of certain assets ahead of a company announcement, our Legal, Security, Special Investigations, and Global Intelligence teams immediately launched an internal investigation into the matter. In the course of our investigation, we identified three suspects: a Coinbase employee who we believe had violated our Global Digital Asset Trading Policy, and two individuals not employed by Coinbase who we believe he was working with.” Coinbase declared, adding that it already fired the employee and handed over to the DOJ all types of information regarding the employee and its ties to wire fraud.

SEC to exempt crypto companies from securities laws

In a sharp turn of events, SEC chairman Gary Gensler noted that the regulatory watchdog is thinking of ways to exempt several crypto exchanges from securities laws in the hope to force them to comply with broader regulatory frameworks.

“There is a potential way forward. I’ve told the industry, the lending platforms, the trading platforms, ‘Come on, talk to us.'” Gensler added.

CFTC disagrees with the SEC

CFTC Commissioner Caroline D. Pham raised a voice of disagreement with the SEC’s actions, because she sees a “regulation by enforcement” scenario from the SEC, highlighting the importance of regulatory authorities working together to prevent unnecessary friction caused by uncertain regulation.

“Instead of crafting tailored rules inclusively and transparently, the SEC is relying on these types of one-off enforcement actions to try to bring all digital assets into its jurisdiction, even those assets that are not securities.” Coinbase’s chief legal officer, Paul Grewal, noted, resting on Pham’s statement. Meanwhile, the DOJ joined the CFTC and Coinbase by not bringing charges against Wahi and the other defendants for securities fraud.

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