Coinbase

The month-long case between the US authorities and a former Coinbase employee has produced a new development. Although the case is not yet closed, the agencies appear to be preparing for a victory.

According to Reuters, Nikhil Wahi, the brother of former Coinbase product manager Ishan Wahi, pled guilty to wire fraud conspiracy charges earlier today.

Guilty Plea Brings Case One Step Closer to a Close

According to the report, Wahi admitted to authorities during a virtual hearing that he used confidential information obtained from Coinbase to profit from the market. As an executive at Coinbase, Ishan had access to first-hand information about coins that the exchange would list before they were released. As a result, Ishan, Nikhil, and a third associate named Sameer Ramani purchased coins using the inside information.

According to the federal indictment from the Attorney’s Office for the Southern District of New York as well as the Federal Bureau of Investigation’s New York Field Office, the Wahis and Ramani made approximately $1.5 million from selling approximately 25 assets.

Wahi reportedly admitted during his hearing that he was aware of the wrongdoing he was involved in but continued anyway. He will most likely be remanded in custody until his sentencing, with a guilty plea putting him in federal prison for years.

Broad Implications from SEC Action

Of course, the investigation is far from over. While Nikhil had pled guilty, Ishan had already pled not guilty in August to two counts of wire fraud and two counts of wire fraud conspiracy. With the former exchange executive still refusing to enter a guilty plea, authorities’ efforts to bring everyone to justice may be hampered.

There is also the issue of the adjacent Securities and Exchange Commission case (SEC). Following the three men’s indictment in July, the SEC filed new charges against them, accusing them of profiting from selling illegal securities.

The SEC explained at the time that nine of the 25 coins the Wahis and Ramani traded were, in fact, securities. Because the coins were listed on Coinbase before the exchange received permission, they qualified as unregistered securities. As a result, the defendants had now violated the antifraud provisions of the Securities and Exchange Commission’s securities regulations.

In addition to the men named in the suit, the SEC has launched a formal investigation into cryptocurrency exchanges and possible insider trading activities. According to FOX Business, the agency sent a letter to a major exchange requesting information about the platform’s security protocols aimed at reducing insider trading. According to the news outlet’s source, several exchanges have already sent the same letter.

While it is unclear who received the letter, the report confirmed that several of the best trading platforms, including Coinbase, Binance, FTX, and Crypto.com, had declined to comment. The SEC had refused to provide any information about a possible investigation. However, given that a former Coinbase employee started this mess, it appears more likely that the San Francisco-based broker will be called in for questioning.

Whatever the outcome of the investigation, the SEC appears to be taking a more serious look at cryptocurrency exchanges and their market activities. The agency is particularly serious about classifying the vast majority of cryptocurrencies as securities, which means several of these coins will eventually fall under its jurisdiction.

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