Insider trading via Coinbase gets 10-month sentence for Nikhil Wahi

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A U.S. District Judge sentenced Nikhil Wahi to 10 months in prison on Tuesday, ending part of a landmark cryptocurrency criminal case. Wahi, the brother of a former Coinbase product manager, was charged with conspiracy to commit wire fraud last July in what prosecutors called the first-ever case of cryptocurrency insider trading.

I made a huge mistake, a terrible mistake, Wahi said on Tuesday.

Nikhil pleaded guilty to the charge in September, admitting that his brother, Ishan Wahi, used his position at one of the biggest crypto exchanges to pass on confidential asset listing information. Ishan would tell Nikhil when a coin was about to be listed on Coinbase. And in response, Nikhil bought shares of the cryptocurrencies just before they appeared on the popular exchange through an anonymous wallet. When the coins’ value inevitably rose after listing, legitimized by their presence on Coinbase, Nikhil was selling the shares for profit, according to a statement from the New York Southern District Attorney.

Today’s sentence makes it clear that cryptocurrency markets are not anarchic, U.S. Attorney Damian Williams said.

In total, Nikhil allegedly earned $892,500 on the illicit tips of his brothers, trading ahead of 40 different Coinbase listings, according to a Reuters report. He was ordered to repay the full amount as part of his conviction in addition to 10 months incarceration.

This is something I will have to live with forever, Nikhil Wahi told sentencing judge Loretta Preska, according to a Bloomberg report. He is subject to deportation to India at the end of his prison term. Nikhil’s defense attorney claimed his client was motivated by a desire to support his parents in India and pay them back for his US college education, Bloomberg reported.

Ishan and a third party, a friend of Nikhils named Sameer Ramani, also face criminal charges for insider trading. Ishan pleaded not guilty to his charge and was released on bail in July. His case is pending. Ramani, on the other hand, is not being held in the United States and is considered to be at large.

Illegal insider trading has real consequences wherever and whenever it occurs, said Williams, the prosecutor. Yet a conviction and sentence do not make a robust regulatory system. A crypto insider trading scandal even reached the hallowed halls of Congress earlier this year. The House Ethics Committee fined North Carolina Rep. Madison Cawthorn $15,000 for his apparently illicit advanced knowledge of NASCAR, which failed Lets Go Brandon Coin sponsorship and promotion of memecoin . Cawthorn did not face criminal charges. And, as always, scams and frauds abound on the blockchain. FTX CEO Sam Bankman-Fried’s fraud trial is scheduled for October.

The fact that the Wahi brothers were captured was mostly due to luck. Twitter user @cobie noted a sketchy Ethereum purchase and posted it. Found an ETH address that purchased hundreds of thousands of dollars worth of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was posted, @cobie tweeted on April 12, according to a report from The Verge. A day later, Coinbases’ security officer responded to say the exchange was investigating. Other tweets reported similar anomalies, although those tweets did not result in anyone being arrested.

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