The brother of a former Coinbase worker has consented to pay the cryptocurrency exchange almost $470,000 for his involvement in an insider trading fraud.
Nikhil Wahi, the brother of former Coinbase product manager Ishan Wahi, will be required to start making restitution payments while serving time in prison, according to a New York District Court filing signed on April 6 and made public on April 10. This is thought to be the first insider trading case involving cryptocurrency.
The sum represents Coinbase’s expenditure for legal services related to the Department of Justice’s investigation and must be reimbursed in full within 20 years after Nikhil’s release from prison.
Nikhil, who entered a guilty plea to initiating trades based on secret information obtained from his brother in September 2022, is currently in prison for 10 months after being found guilty of wire fraud conspiracy charges on January 10.
Prosecutors claim that Ishan knew when the exchange would be launching new cryptocurrencies because of his position at Coinbase and told his brother Nikhil and a friend of theirs, Sameer Ramani, before the asset listings were made known to the general public.
Prosecutors claim that after their inclusion, the values of the listed cryptocurrency increased generally, resulting in Nikhil making a profit of $892,500. Nikhil was ordered to hand over these cash to the US authorities as part of his sentence.
Coinbase defended the brothers and Ramani in a separate civil case after the group was accused of breaking antifraud rules by the Securities and Exchange Commission.
Coinbase stated in an amicus brief filed on March 13 that it disagrees with the defendants’ actions but supports a motion to dismiss the case because the SEC lacks the authority to sue because the disputed tokens fail the Howey test, a standard used by American courts to determine whether an asset is a security.