SEC Settles Case Against Wahi Brothers for Insider Trading of Cryptocurrency Assets
The U.S. Securities and Exchange Commission (SEC) announced on May 30, 2023, that it had settled charges against two brothers, Ishan and Nikhil Wahi, for insider trading of cryptocurrency assets. The SEC alleged that the Wahis used their positions at Coinbase Global, Inc., a cryptocurrency exchange, to trade ahead of announcements about which cryptocurrencies would be listed on the platform. The SEC’s complaint alleged that the Wahis made approximately $1.5 million in illegal profits from their insider trading scheme.
As part of the settlement, the Wahis agreed to pay disgorgement of $1.2 million, prejudgment interest of $230,000, and a civil penalty of $600,000. The Wahis also agreed to be permanently enjoined from violating the antifraud provisions of the federal securities laws.
The SEC’s enforcement action against the Wahis is a reminder that insider trading is a serious crime. The SEC is committed to protecting investors from those who would seek to profit from their inside knowledge.
The Allegations
The SEC’s complaint alleged that the Wahis used their positions at Coinbase to obtain nonpublic information about which cryptocurrencies would be listed on the platform. The complaint alleged that the Wahis then used this information to trade in the cryptocurrencies ahead of the public announcements.
The SEC’s complaint alleged that the Wahis’ insider trading scheme began in 2019 and continued until 2021. The complaint alleged that the Wahis made approximately $1.5 million in illegal profits from their insider trading scheme.
The Settlement
As part of the settlement, the Wahis agreed to pay disgorgement of $1.2 million, prejudgment interest of $230,000, and a civil penalty of $600,000. The Wahis also agreed to be permanently enjoined from violating the antifraud provisions of the federal securities laws.
The SEC’s Response
In a statement, the SEC’s Enforcement Director Gurbir S. Grewal said, “While the technologies at issue in this case may be new, the conduct is not. We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple.”
Grewal added, “The federal securities laws do not exempt crypto asset securities from the prohibition against insider trading, nor does the SEC. I am grateful to the SEC staff for successfully working to resolve this matter.”
The Impact of the Settlement
The SEC’s settlement with the Wahis is a significant development in the fight against insider trading in the cryptocurrency industry. The settlement sends a clear message to those who would seek to profit from their inside knowledge that the SEC is watching and will take action against those who violate the law.
The settlement also highlights the importance of companies in the cryptocurrency industry to have strong insider trading controls in place. Companies should take steps to ensure that their employees are aware of the risks of insider trading and that they have a process in place for reporting suspected insider trading.
The Future of Insider Trading Enforcement in the Cryptocurrency Industry
The SEC’s settlement with the Wahis is a sign that the SEC is taking insider trading in the cryptocurrency industry seriously. It is likely that we will see more enforcement actions in this area in the future.
The SEC has a number of tools at its disposal to combat insider trading, including civil lawsuits, criminal prosecutions, and injunctive relief. The SEC is also working with other regulators around the world to combat insider trading in the cryptocurrency industry.
The fight against insider trading is an ongoing one, but the SEC’s settlement with the Wahis is a significant step forward. The settlement sends a clear message to those who would seek to profit from their inside knowledge that the SEC is watching and will take action against those who violate the law.
