They are watching you: A single tweet led to the arrest of a Coinbase executive who faces up to 20 years in prison

Former Coinbase manager Ishan Wahi was arrested on suspicion of insider trading trading a company’s securities by individuals with access to confidential or non-public information about the company for his enrichment. What’s notable is that the dude was found literally by one tweet previously posted by opinion leader Jordan Fish, mostly known as Cobie. Yes, guys, the FBI is watching you. 

The prosecutor’s office noted that Ishana Wahi had access to data related to the cryptocurrencies on the platform. In particular, he knew when the company intended to make relevant public statements and open trading. According to the U.S. Department of Justice press release, law enforcement also arrested his brother, Nikhil Wahi, and charged his friend Samir Ramani. All three face up to 20 years in prison. 

Insider trading 

The report says that Ishan works at Coinbase as a product manager assigned to a Coinbase asset listing team. In that role, he was involved in the highly confidential listing of crypto assets on Coinbase’s exchanges. He had detailed and advanced knowledge of which crypto assets Coinbase was planning to list and the timing of public announcements continuing through May 22. 

“The suspects engaged in a conspiracy to commit electronic communication scams and a fraudulent insider trading scheme for crypto assets by using confidential Coinbase information about a planned listing on the exchange,” the publication said. 

According to the investigation, between June 2021 and April 2022, the former exchange employee passed this confidential information to his brother and Ramani at least 14 times — leading to $1.5 million in “realized and unrealized gains.” The latter, in their turn, made deals for profit. 

Investigators explained that to hide the traces of criminal activity, the suspects used accounts on centralized exchanges registered to fictitious persons. And they probably thought they could continue to get rich, but their actions were already on the radar of crypto Twitter. 

How did they get caught? 

The criminals were caught in a tweet by a user nicknamed Cobie. In April 2022, he discovered an address that bought “hundreds of thousands of dollars” in tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published. Is it a coincidence? Of course not.

The Coinbase chief operating officer invited Wahi to a “face-to-face meeting,” according to the press release. The latter confirmed his intention to appear but attempted to flee the country the next day, but authorities, who had already been watching him, got him first.

What does Coinbase say? 

Coinbase co-founder and CEO Brian Armstrong commented on the situation on Twitter. In particular, he said, the company actively monitors potentially illegal activity and investigates any alleged misconduct.

“In April, we received information about possible frontrunning of assets shortly before being listed on Coinbase. We immediately launched an investigation into this,” he said. 

He also added that they identified three suspects due to THEIR investigation and provided this information to law enforcement. 

However, Cobie questioned the statement of the head of Coinbase. He doubts that the company actively monitors with any degree of competence. 

“Isn’t Coinbase’s duty to have robust processes and checks around their core product offering — crypto exchange? There is a publicly traded company. They know which coins they just listed. It’s not hard to find a wallet that buys all those coins the day before,” noticed Cobie. 

According to him, until mid-last year, the Coinbase API leaked info about new listings regularly. Then, they pivoted to adding worse tokens with weak liquidity and low market caps. And they could not self-identify front-running on-chain despite running “ongoing monitoring.” 

After his tweet, Cobie was asked by several influential crypto industry people to stop posting about Coinbase’s story because it can be “bad for the industry,” and regulators may want to get involved. However, the blogger is sure that the problem is not in his posts but the incompetence of Coinbase. 

Notorious cases of insider trading with cryptocurrencies 

OpenSea 

The case at Coinbase is not the first time someone has tried to profit from insider trading in cryptocurrencies. In June 2022. U.S. authorities have brought the first-ever charge of insider trading in non-exchangeable tokens against former OpenSea employee Nate Chastain, who worked as a product manager at the company. 

According to the investigation, Chastain had confidential data about which NFT works should be placed on the main page of OpenSea, bought them at a low price before publication, and then resold them after a marked increase in demand with “enormous profits.”

The former OpenSea employee purchased 45 different NFTs before appearing on the platform’s homepage. U.S. authorities believe Chastain used the scheme from July through September 2021. 

Chastain was arrested on June 1. He was charged with fraud and money laundering, each with a maximum sentence of 20 years in prison. He pleaded not guilty.

Binance

Another case, though unconfirmed, is related to insider trading on Binance. The exchange has been targeted for refusal to register and comply with anti-money laundering standards in several countries. As a result, some countries have banned its service because of concerns about cryptocurrency money laundering.

The CFTC (Commodity Futures Trading Commission) also recently launched an investigation, contacting potential insider witnesses. While the exchange has not yet been accused of wrongdoing, they have announced a restructuring to increase transparency and improve relations with regulators. But, as they say, “innocent until proven guilty.”