The US Securities and Exchange Commission (SEC) has reached a settlement with two individuals, Ishan Wahi and his brother Nikhil Wahi, who were involved in an insider trading scheme at Coinbase. Ishan Wahi, a former product manager at Coinbase, allegedly informed his brother and his friend about upcoming Coinbase listings before they were known to the public. Nikhil Wahi and his friend then purchased the pending cryptocurrencies before the listing date and sold the assets for profit after the listing.

SEC’s Comments

Gurbir Grewal, Director of the SEC’s Division of Enforcement, commented on the case, stating that although the insider trading scheme involved new technologies, cryptocurrencies are not exempted from insider trading laws. The SEC did not suggest that all cryptocurrencies involved in the case are securities. However, it said that Nikhil Wahi and his friend purchased at least 25 cryptocurrencies, and at least nine assets are securities.

Settlement and Sentencing

Subject to court approval, Ishan and Nikhil Wahi will be permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934, specifically under Rule 10b-5. That rule covers any action or omission that results in fraud or deceit related to securities trading. The brothers have pled guilty to conspiracy to commit wire fraud. Ishan Wahi has been sentenced to 24 months in prison and will forfeit ETH and USDT currently worth over $30,000, while Nikhil Wahi has been sentenced to 10 months in prison and will forfeit $892,000. Past reports indicate that Ishan and Nikhil Wahi received their prison sentences in May and January 2023, although the SEC announced the outcomes today.

DOJ’s Responsibility

While the SEC handled the securities aspects of the case, the US Department of Justice (DOJ) was responsible for the criminal aspects of the case.

The SEC has settled with two individuals involved in an insider trading scheme at Coinbase. The regulator alleged that Ishan Wahi informed his brother and his friend about upcoming Coinbase listings before they were known to the public. Nikhil Wahi and his friend then purchased the pending cryptocurrencies before the listing date and sold the assets for profit after the listing. The SEC did not suggest that all cryptocurrencies involved in the case are securities. However, it said that Nikhil Wahi and his friend purchased at least 25 cryptocurrencies, and at least nine assets are securities. Ishan and Nikhil Wahi will be permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934, specifically under Rule 10b-5. The brothers have pled guilty to conspiracy to commit wire fraud. Ishan Wahi has been sentenced to 24 months in prison and will forfeit ETH and USDT currently worth over $30,000, while Nikhil Wahi has been sentenced to 10 months in prison and will forfeit $892,000. The DOJ was responsible for the criminal aspects of the case.

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