A former Coinbase employee’s brother pleaded guilty in the first-ever cryptocurrency insider trading case in the US. The former employee shared confidential Coinbase information with his 26-year-old Indian brother and his Indian-American friend, who then used Ethereum blockchain wallets to acquire the assets and traded at least 14 times before Coinbase announcements in June 2021 and April 2022.
Insider trading scam in Coinbase
The Brother of a former product manager at Coinbase, an American cryptocurrency exchange admits to using insider information for an insider trading scam in a US court. Nikhil Wahi and his friend Sameer Ramani came across information on forthcoming announcements through his brother Ishan Wahi. The pair used data on assets that were due to be traded on Coinbase, making a profit of $1.1 million by investing in them. Moreover, this is the first insider trading scam to be detected in the ecosystem.
As per the US Department of Justice, Nikhil Wahi “used anonymous Ethereum blockchain wallets to acquire those crypto assets shortly before Coinbase publicly announced the listings”.
“I knew that it was wrong to receive Coinbase’s confidential information. And make trades based on that confidential information,” stated Nikhil Wahi. He added that he understood his guilty plea. He will eventually be deported from the US.
Cryptocurrency and scams
Cryptocurrency‘s unregulated nature and impossibility to counterfeit make it a reliable mode of investment for Millenials and GenZ. Over 300 million across the world own crypto. Several governments are yet to introduce regulations and are apprehensive about virtual currency. The lack of regulation rises the risk of scams such as insider trading.
Australian researchers reveal that 25 percent of Coinbase listings in the last four years were hidden due to insider trading. The scam is based on the Coinbase effect, a recent decisive factor in the rates of crypto. This means, that the prices of any token listed for trading are likely to increase. The scammers buy tokens in bulk and sell them once the rates go up after Coinbase’s official announcement.
