It appears that a cryptocurrency user on Twitter named Cobie influenced the FBI to file an insider trading case. The US Attorney’s Office for the Southern District of New York is filing an indictment against a former Coinbase employee who allegedly informed his brother and friend about assets that were about to be listed on Coinbase — resulting in $1.5 million in “realized and unrealized gains,” according to the indictment.
US Attorney Damian Williams said in a statement that this is the first insider trading case involving the cryptocurrency markets.
Ishan Wahi, the indicted Coinbase employee, participated in the listing of new crypto assets on the Coinbase platform. When Coinbase announces that a new token will be listed, that token will often show up in value — meaning the company has asked employees to remain silent about Coinbase’s listing plans. Wahey started working at Coinbase in October 2020. In August 2021, he was given access to a channel where Coinbase employees discussed listing new projects. With details like ‘Exact announcement / launch dates + timelines’.
According to the indictment, Wahyi told his brother and friend what purchases needed to be made before Coinbase announced the listing of these tokens. It is alleged that Nikhil Wahi and Sameer Ramani have purchased at least 25 assets in advance of at least 14 listings on Coinbase.
on April 12, Kobe tweeted, “I found an ETH address that bought hundreds of thousands of dollars worth of tokens exclusively on a Coinbase Asset List post about 24 hours before it was posted, rofl.” According to the indictment, Kobe was tweeting about a wallet owned by Ramani. On April 13, Coinbase’s chief security officer responded to the tweet To say that the company was checking.
In May, Wahey received an email saying that he had to attend a meeting in person as part of the Coinbase investigation. In response, he booked a one-way ticket to New Delhi, India. He also called and texted his brother and friend about the investigation. He was stopped by law enforcement before he could board his flight and was found to be carrying “three large suitcases, seven electronic devices, two passports and various other forms of identification, hundreds of dollars in United States currency, financial documents and other personal items,” according to the indictment.
Coinbase initially posted a blog post in April, possibly as a follow-up to their tweet, saying that the company’s goal is to “create a level playing field for all new assets being created in crypto.” In the post, Coinbase notes that its employees are aware of concerns that “some market participants may benefit from information from our listing process.” It also suggests that Coinbase employees may “intentionally or unintentionally” drop out.
When I tweeted the “inside address” tweet, I’d been tweeting for months about how Coinbase’s listings/front view/highlights options got into a big mess.
Coinbase was widely known and recognized within CT.
Now, Coinbase is playing the “hero” who catches the ~evil scam~! pic.twitter.com/3zBFXXkAvS
– Cobie 21 July 2022
Today, Coinbase has updated their blog post to make sure everyone knows that Coinbase doesn’t consider tokens as securities because I think that’s what’s important to them. Later:
We understand that the Securities and Exchange Commission has separately filed securities fraud charges related to these violations today. The Department of Justice has not charged securities fraud. No assets listed on our platform are securities, and the SEC fee is an unfortunate distraction from appropriate law enforcement action today.
So what did we learn here, friends? First of all, don’t do illegal things. Second, don’t do it on a public blockchain where anyone can search. Third, Coinbase definitely reads Twitter’s cryptography. Fourth, the feds do, too. Fifthly, when one of your employees is indicted for fraud and conspiracy to commit electronic fraud, the most important time to note that tokens are not securities is right after the indictment is opened.