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In the first insider trading case involving cryptocurrencies, a cryptocurrency trader was convicted of insider trading in a federal district court and was recently sentenced to 10 months in prison.
Defendant Nikhil Wahi pleaded guilty in the United States District Court for the Southern District of New York to illegally trading information tipped off by his brother, a former Coinbase product manager. He used that information to trade 40 cryptocurrencies that were slated to be listed on the Coinbase platform between April 2021 and July 2022, when he was arrested. Prosecutors alleged that Wahhi used these tips to sell crypto assets for profit. Under the terms of the plea bargain, Wahhi agreed he would serve 10 months in prison. Wahi’s brother, who has pleaded not guilty to Ishan Wahi, is due to appear in court in March.
Insider trading is not uncommon, and while this conviction represents the first insider trading conviction in the cryptocurrency market, it is unlikely to be the last. Following Wahhi’s guilty plea, the Southern District’s federal prosecutor said the ruling “makes clear that the cryptocurrency market is not lawless.” In fact, both prosecutors, including the infamous FTX case, are increasingly scrutinizing the crypto industry, not only in the regulatory context. Just this summer, the chairman of the U.S. Commodity Futures Trading Commission called for congressional action on crypto regulation, and SEC Chairman Gary Gensler announced that he would step up oversight of the crypto industry, including enforcing conflicts of interest. announced that it plans to take advantage of the authority of the SEC. law.
Wahhi’s conviction appears to be the latest in a series of government actions to increase scrutiny of the cryptocurrency market and deter possible criminal activity. His insider trading beliefs follow long-standing enforcement theories, but the government could use a new approach in tackling how to regulate the emerging crypto industry. It highlights the important role that outside lawyers can play in helping companies and individuals succeed in the crypto market, while keeping it to a minimum.
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