A New York court has sentenced former Coinbase product manager, Ishan Wahi, to 24 months imprisonment for conspiracy to commit insider trading using confidential information from Coinbase. The judgment came after the defendant admitted to tipping his brother, Nikhil Wahi, and Nikhil’s friend, Sameer Ramani, helping them make over $1.1 million from trading.

A case of insider trading

The case is the first time a court will officially try anyone for insider trading in crypto, marking a landmark achievement in the industry. Before the court’s verdict, Ishan Wahi also pled guilty to two counts of conspiracy to commit wire fraud in a related case.

According to the Department of Justice’s announcement, Ishan Wahi violated the trust Coinbase had in him by tipping off his associates of upcoming crypto asset listings, thanks to his privileged position as a product manager with the firm’s asset listing team.

When a new coin or token lists on Coinbase, the price almost instantly skyrockets due to the company being one of the most popular crypto exchanges in the world. Wahi provided information about the crypto assets Coinbase was planning to list to his associates, essentially constituting insider trading.

Against Coinbase policy

For clarity, Coinbase’s terms require employees to keep information about upcoming asset listings strictly confidential, and it forbade them from providing a “tip” to outsiders.

Wahi’s misdeeds became public following a tweet by a prominent crypto-related account, bringing attention to an Ethereum blockchain wallet that bought hundreds of thousands of dollars worth of a token that would be featured in the Coinbase Asset Listing 24 hours before it was published.

Coinbase followed up with an investigation, inviting Wahi to an in-person meeting to discuss the matter on May 16, 2022. Ishan Wahi reportedly purchased an Indian flight ticket with a May 16 departure date while keeping constant contact with Nikhil Wahi and Sameer Ramani.

Insider Trader Law applies to crypto as well

However, law enforcement would intercept the flight, marking the beginning of Wahi’s year-long legal battle that eventually resulted in a jail sentence.

While reacting to the sentence, U.S. Attorney Darmian Williams said it should warn relevant cryptocurrency stakeholders that insider trading laws apply to them.

“The Southern District of New York will hold those who engage in insider trading to full account, regardless of whether their illegal conduct occurs in the equity markets or the market for crypto assets,” he said.