Yes, crypto Twitter, the FBI reads your tweets

It appears that a crypto Twitter user named Cobie prompted the FBI to bring an insider trading case. The U.S. Attorney’s Office for the Southern District of New York files an indictment against a former Coinbase employee who allegedly told his brother and pal about assets about to be listed on Coinbase – leading to 1.5 million dollars in “realized and unrealized gains,” according to the indictment.

This is the first case of insider trading involving the cryptocurrency markets, U.S. Attorney Damian Williams said in a statement.

Ishan Wahi, the Coinbase employee who was charged, was involved in listing new crypto assets on the Coinbase exchange. When Coinbase announces that a new token will be listed, that token often goes up in value, meaning the company has told employees to keep quiet about Coinbase’s listing plans. Wahi started working for Coinbase in October 2020. In August 2021, he was granted access to a channel where Coinbase employees discussed the list of new projects. with details like “exact announcement / launch dates + deadlines”.

According to the indictment, Wahi told his brother and friend what purchases to make just before these tokens were announced as being listed by Coinbase. Nikhil Wahi and Sameer Ramani reportedly purchased at least 25 assets ahead of at least 14 listing announcements on Coinbase.

On April 12, Cobie tweeted, “Found an ETH address that purchased hundreds of thousands of dollars worth of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was posted, rofl.” According to the indictment, Cobie was tweeting about a wallet belonging to Ramani. On April 13, Coinbase’s security officer responded to the tweet say the company was investigating.

In May, Wahi received an email informing him that he had to attend an in-person meeting as part of Coinbase’s investigation. In response, he booked a one-way ticket to New Delhi, India. He also called and texted his brother and friend about the investigation. He was stopped by law enforcement before he could board his flight and was found to be carrying “three large suitcases, seven electronic devices, two passports, several other forms of identification, hundreds of dollars in US currency, financial documents and other personal effects”. “, according to the indictment.

Coinbase originally published a blog post in April, likely following his tweet, saying the company’s goal was to “create a level playing field for all new crypto assets being created.” In the post, Coinbase notes that its employees are aware of concerns that “certain market participants could take advantage of information from our registration process.” He also notes that Coinbase employees may “knowingly or unknowingly” leak.

Today Coinbase updated their blog post to make sure everyone knows that Coinbase doesn’t consider tokens as securities because I guess that’s what’s important to them. Not really:

We understand that the SEC separately filed securities fraud charges related to this wrongdoing today. The DOJ did not charge securities fraud. No asset listed on our platform is a security, and the SEC charges are an unfortunate distraction from today’s proper enforcement action.

So what have we learned here, my friends? First of all, don’t do illegal things. Second, don’t make them on a public blockchain where anyone can watch. Third, Coinbase definitely reads Twitter crypto. Fourth, so are the Feds. Fifth, when one of your employees is charged with wire fraud and conspiracy to commit wire fraud, the most important time to note that tokens are not securities is right after the indictment is unsealed.

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