Insider Trading Defendant Sentenced to Pay Coinbase $470K

Nikhil Wahi, the brother of former Coinbase product manager Ishan Wahi, will pay the leading exchange almost $470,000 for his part in an insider trading scheme according to a New York District Court filing publicized on April 10, CoinTelegraph reported.

Crypto insider trading case led to conviction

Nikhil Wahi will start making restitution payments during his prison term. This is the first crypto-related insider trading case.

He must pay off the full amount within 20 years of his release from prison. The court established that Coinbase spent around $470,000 on legal services after the US Department of Justice launched an investigation.

How the scheme worked

In September last year, the defendant pleaded guilty to making trades based on private information he got from his brother. Allegedly, Ishan knew when Coinbase would be listing a new coin because of his position. He would tell his brother and Sameer Ramani, an acquaintance, before the listings were announced publicly.

After a crypto is listed, its price increases, often skyrocketing immediately after the ICO. The scheme netted the defendant a profit of almost $900,000, prosecutors allege.

Nikhil is currently doing time for wire fraud conspiracy after being sentenced on January 10. He was required to transfer his profit to the US government as part of his punishment.

Coinbase defends brothers and Ramani

After the SEC sued the brothers and Ramani for violating securities laws in a separate civil case, Coinbase defended them, arguing that the US regulator was not entitled to file a lawsuit.

The exchange condemned their conduct, but asked to dismiss the case because the assets in question did not pass the Howey test, a US legal canon that determines whether an asset is a security.

The SEC started investigating crypto exchanges following the collapse of the Terra LUNA token, in which investors lost around $40 billion when it lost its peg to the US dollar.