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Coinbase manager arrested for insider trading! Illegal gains exceed $1.5 million, SEC declares 9 implicated coins as securities

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Coinbase manager arrested for insider trading! Illegal gains exceed $1.5 million, SEC declares 9 implicated coins as securities

The U.S. Department of Justice announced the arrest of former Coinbase product manager Ishan Wahi on the 22nd for multiple instances of insider trading during his tenure, resulting in over $1.5 million in illegal gains. Additionally, the U.S. Securities and Exchange Commission (SEC) claimed that Coinbase has listed at least nine digital assets that are considered unregistered securities, sparking widespread controversy.

Coinbase Insider Trading

According to a press release from the U.S. Department of Justice, former Coinbase product manager Ishan Wahi engaged in at least 14 instances of sharing planned listings of coins and the timing with his brother Nikhil Wahi and friend Sameer Ramani between June 2021 and April 2022. This allowed them to purchase in advance and quickly sell for profit once the listings were announced. The realized and unrealized profits totaled over $1.5 million and involved 25 different cryptocurrencies.

During the insider trading process, Nikhil Wahi and Sameer Ramani used centralized exchange accounts held in the names of others and transferred funds, cryptocurrencies, and illicit gains through multiple anonymous Ethereum wallets. They even regularly created new Ethereum wallets with no transaction history to further conceal the scheme.

The press release also mentioned a tweet by prominent cryptocurrency trader Cobie on 4/12 regarding insider trading, indicating that an Ethereum address purchased hundreds of thousands of dollars worth of cryptocurrencies, all of which were coins that appeared on the listing. The Department of Justice confirmed that this trading activity was indeed conducted by Sameer Ramani.

Currently, the U.S. Attorney's Office for the Southern District of New York has charged the three individuals with telecommunications fraud.

Prosecutor Damian Williams, who is handling the case, also stated:

"Web3 is not a lawless place; fraud is fraud, whether it occurs on the blockchain or on Wall Street."

SEC Claims Coinbase Listings of Securities Digital Assets

Regarding the aforementioned insider trading case, the SEC also issued a press release, mentioning that out of the 25 cryptocurrencies involved in the Coinbase insider trading, at least 9 are securities. The SEC has filed lawsuits against the three individuals in the U.S. District Court for the Western District of Washington for violating the anti-fraud provisions of the securities laws.

The nine problematic assets are AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.

However, Coinbase has refuted the SEC's claim that the nine assets listed are securities, stating that seven of them are currently listed on Coinbase's platform but are not securities. Coinbase asserts that before listing a coin, it undergoes a rigorous process to analyze and review each digital asset, a process that has been reviewed by the SEC.

In addition, during the insider trading investigation, both Coinbase and the Department of Justice and SEC cooperated, but the Department of Justice chose not to bring securities fraud charges against the individuals involved.

"The SEC's charges underscore a critical issue: the U.S. lacks a clear or workable regulatory framework for digital asset securities. The SEC has not created rules in an inclusive and transparent manner but has sought to bring all digital assets under its jurisdiction through these one-off enforcement actions, even those that are not securities," Coinbase stated.

CFTC Commissioner Caroline Pham also commented on the event on Twitter, stating that the SEC's actions are a standard case of "regulation by enforcement," highlighting the need for the SEC to establish clear rules through proper regulations rather than enforcement actions.

To address the lack of transparency in current crypto regulations, Coinbase has submitted a petition to the SEC today, requesting the establishment of rules specifically tailored for digital asset securities instead of relying on outdated securities laws from the Securities Act of 1933 and the Securities Exchange Act of 1934.

Cobie's Disdain

While Coinbase appears to have cooperated well with regulatory agencies in this incident, Cobie, who was the first to uncover Coinbase's insider trading and has repeatedly criticized its listing of numerous low-quality coins, finds it ironic that Coinbase portrays itself as a "hero" for apprehending the individuals involved.

Cobie stated that it is no surprise that Coinbase is involved in insider trading, as a leading exchange in the industry, why couldn't they monitor and identify insider trading behavior themselves? Coinbase clearly knows which coins to list, and finding the wallets that purchased these coins the day before is not difficult.

Furthermore, Cobie mentioned that until mid-last year, Coinbase's API regularly leaked information about listed coins and even chose poor tokens with low liquidity and market value. Despite claiming to have "continuous monitoring," they still could not prevent insider trading.

Given the suspicious behavior, Cobie believes that compared to the losses caused by Coinbase's previous incompetence, the $1.5 million stolen in the incident is insignificant.

"Several influential figures in the crypto industry asked me to stop posting tweets about Coinbase listings and insider trading issues because it may attract regulatory attention and involvement, which is detrimental to the industry's development. But the problem is not my tweets, the problem is Coinbase," Cobie concluded.