On July 21, 2022, the US Department of Justice (DOJ) unsealed an indictment charging Ishan Wahi (Wahi), a former product manager at a large cryptocurrency trading platform (the Platform)—along with his brother Nikhil Wahi (Nikhil) and friend Sameer Ramani (Ramani)—with wire fraud and conspiracy to commit wire fraud for an alleged insider trading scheme using Wahi’s position to funnel confidential information to the others regarding digital assets set to be listed on the Platform before their public announcement.[i] On the same day, the Securities and Exchange Commission (SEC) filed a first-of-its-kind civil action against the trio alleging they violated federal securities laws because the SEC alleges that certain of the digital assets are securities.[ii] The DOJ’s action appears to signal an emerging trend of “insider trading” prosecutions in the digital asset space, and the potential effects of the SEC’s civil claims could have dramatic implications for actors in the digital asset space, especially trading platforms.
According to the indictment, Wahi began working at the Platform as a product manager in October 2020. In this role, Wahi was involved in the process of listing new digital assets on the Platform, and had access to highly confidential information, including (1) which assets would be listed on the Platform, and (2) the timing of public announcements for the listings. In particular, during the period of the alleged criminal activity, Wahi was a member of a small, private chat group used to discuss the precise dates and timeline for announcements and launch dates. Wahi allegedly tipped off either Nikhil or Ramani before major announcements, to capitalize on the value bump digital assets often receive following listing announcements by the Platform. Nikhil and Ramani used various exchange accounts held in others’ names to purchase the digital assets, and then transferred the funds to anonymous Ethereum wallets. The trio allegedly…
