Coinbase gets $470K for its insider trading case

For his role in an insider trading scheme, the brother of a former Coinbase employee has agreed to pay the cryptocurrency exchange nearly $470,000.

According to a New York District Court filing signed on April 6 and made public on April 10, Nikhil Wahi, the brother of former Coinbase product manager Ishan Wahi, will be required to pay restitution while serving time in prison in what is believed to be the first insider trading case involving cryptocurrency.

The amount must be paid in full within 20 years of Nikhil’s release from prison and represents the amount Coinbase spent on legal services associated with the Department of Justice investigation.

Nikhil pleaded guilty in September 2022 to initiating trades based on confidential information obtained from his brother, and he is currently serving a 10-month sentence for wire fraud conspiracy after being sentenced on January 10.

Prosecutors alleged that Ishan, due to his position at Coinbase, knew when the exchange would list new cryptocurrencies and informed his brother Nikhil and their associate Sameer Ramani before the asset listings were made public.

According to prosecutors, the prices of the listed cryptocurrencies generally increased after their listing, resulting in a profit of $892,500 for Nikhil. Nikhil was required to forfeit these funds to the United States government as part of his sentence.

In a separate civil action, Coinbase defended the brothers and Ramani against allegations that they violated antifraud provisions of U.S. securities statutes.

In an amicus brief filed on March 13, Coinbase condemned the conduct of the defendants but supported a motion to dismiss the case, arguing that the SEC lacked jurisdiction to file suit because the tokens in question failed the Howey test, a U.S. legal doctrine that determines whether an asset is a security.

In a filing dated April 3, the SEC stated that it had reached an “agreement in principle” with Ishan to resolve the SEC’s claims and that it was also engaged in “good faith discussions” with Nikhil.