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Crypto Law/Level VI · Market conduct/6.2 Insiders and rugs/Lesson 2

Insider trading on tokens: the Coinbase listing case

How a Coinbase product manager’s tips about upcoming listings led to the first US crypto insider-trading prosecution, and why the criminal and SEC cases rested on different theories.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Zero-cost: adopt a written trading policy defining confidential information, setting blackout periods around listings, unlocks and partnerships, and requiring disclosure of personal wallets. Coinbase’s policy covering listings made the duty plain. Catch: enforce it, including against tipping friends and relatives.
  2. Never trade on, or pass on, non-public listing, treasury or unlock news; under Carpenter (1987) such employer information is property for wire fraud, so whether the token is a security does not matter. Catch: on-chain buys before announcements are routinely spotted.
  3. Insiders who must sell can copy the securities model: a written pre-set plan like SEC Rule 10b5-1, with a cooling-off period (30 days for most persons; 90 to 120 days for directors and officers). Catch: only plans adopted in good faith without inside information help.
  4. In the EU, MiCA Article 89 bans insider dealing in crypto-assets admitted to trading or where admission is sought, whatever their classification. Publishing news to everyone at once under Article 88 removes the information edge at no cost.

MaterialsThe US Attorney’s press release of 9 May 2023 on Ishan Wahi’s sentenceThe SEC press release 2022-127 and its complaint in SEC v. WahiCarpenter v. United States, 484 U.S. 19 (1987), on confidential business information as propertyYour employer’s or project’s trading policy, if it has one

Wonder

  1. Can trading a token on inside information be a crime if the token is not a security?
  2. How did anyone notice trades made through pseudonymous wallets?
  3. What counts as confidential information inside a crypto company?

Explore

  1. Ishan Wahi joined Coinbase in October 2020 as a product manager on its asset-listing team. He knew which tokens the exchange planned to list and when it would announce them, and prices typically rose sharply after such announcements. Coinbase’s policies treated listing decisions as confidential information that employees must not share. According to prosecutors, between June 2021 and April 2022 Wahi repeatedly tipped his brother, Nikhil Wahi, and his friend Sameer Ramani, who bought the tokens shortly before announcements and sold afterwards. The SEC put their combined profits at more than $1.1 million.
  2. The scheme came to light in public. On 12 April 2022 a well-known crypto Twitter account flagged an Ethereum wallet that had bought hundreds of thousands of dollars of tokens about 24 hours before they appeared in a Coinbase listing post. Coinbase opened an investigation. On 11 May its director of security operations summoned Wahi to an in-person meeting set for 16 May. The night before, Wahi bought a one-way ticket to India; law enforcement stopped him before he boarded. Pseudonymous wallets did not hide the pattern: trades that cluster just before announcements are visible on-chain.
  3. On 21 July 2022 prosecutors in the Southern District of New York announced what they called the first-ever cryptocurrency insider trading case, charging all three men with wire fraud and wire fraud conspiracy. The theory did not depend on the tokens being securities. Since Carpenter v. United States (1987), the Supreme Court has treated an employer’s confidential business information as property under the wire fraud statute, so taking it in breach of a duty of confidence can be fraud. Nikhil Wahi was sentenced to 10 months in January 2023. Ishan Wahi pleaded guilty to two counts of conspiracy to commit wire fraud and on 9 May 2023 received two years in prison and forfeiture.
  4. The SEC sued the same three men the same day in federal court in Seattle, alleging securities fraud. That required a security: the SEC said at least 9 of the 25 or more tokens traded were crypto asset securities. Securities insider trading by an outsider to the issuer rests on the ‘misappropriation theory’, which the Supreme Court upheld in United States v. O’Hagan (1997). Coinbase publicly rejected the claim that it lists securities. In May 2023 the brothers settled without admitting or denying the allegations; no penalty was imposed, and in pleading guilty Ishan Wahi said he did not believe the tokens were securities.
  5. The split matters more today. After the SEC’s 2025 change of course and its March 2026 interpretation (lessons 3.2.2 and 3.2.3), many tokens are less likely to be treated as securities, which leaves the wire-fraud route doing more of the work. That route has limits: in the OpenSea case the Second Circuit required the confidential information to have commercial value to the employer (lesson 6.2.3). Other places differ. In the EU, MiCA Article 89 prohibits insider dealing in crypto-assets admitted to trading or for which admission has been requested, whatever their classification (lesson 6.3.4).
  6. For builders and staff the information at risk is broader than listings: exchange decisions, partnership announcements, treasury buys or sells, token unlocks and security incidents. A practical check is to read your organisation’s trading policy, or note that none exists. Look for a definition of confidential information, blackout periods around announcements, pre-clearance of trades and disclosure of personal wallets. Coinbase’s policy expressly covered listing decisions, and wording of that kind makes the duty of confidence plain. Remember too that the charges here centred on tipping: passing information to a relative or friend who trades on it can be enough for liability.

Key facts

  • Ishan Wahi worked at Coinbase from about October 2020 as a product manager on its asset-listing team.
  • On 21 July 2022 the US Attorney’s Office for the Southern District of New York announced wire fraud charges against Ishan Wahi, Nikhil Wahi and Sameer Ramani in what it called the first-ever cryptocurrency insider trading case.
  • Ishan Wahi pleaded guilty to two counts of conspiracy to commit wire fraud and was sentenced on 9 May 2023 by Judge Loretta Preska to two years in prison.
  • Nikhil Wahi was sentenced to 10 months in prison in January 2023.
  • The SEC alleged that at least 9 of the crypto assets traded in the scheme were securities and that the trading produced more than $1.1 million in profits.
  • In Carpenter v. United States (1987) the Supreme Court held that confidential business information is property protected by the mail and wire fraud statutes.

Exercise nine, six, three, one

9CollectList up to 9 pieces of non-public information that a person working at an exchange, token project or crypto fund might learn (some lists are shorter), such as a planned listing, a token unlock date or an undisclosed hack.
6ClusterSort them into 6 categories: listings and delistings, token supply events, treasury trades, partnerships, security incidents, and information that may not be confidential at all.
3DistillReduce the 6 categories to 3 groups: information that would likely move a token’s price, information an employer clearly keeps confidential, and information that fits both.
1CrystallizeWrite 1 sentence explaining, in your own words, why the criminal case against Ishan Wahi did not need the tokens to be securities but the SEC’s case did.

Fact check

Dates, figures and claims checked against the published sources listed below.

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