The former director of Coinbase has been sentenced to two years in prison in a US insider trading case

NEW YORK (Reuters) – Ishan Wahi, a former product manager for Coinbase Global Inc (COIN.O), was sentenced on Tuesday to two years in prison in what US prosecutors called the first cryptocurrency insider trading case.

U.S. District Judge Loretta Prisca sentenced Ishan Wahi, 32, in Manhattan federal court after the defendant pleaded guilty in February to two counts of conspiracy to commit wire fraud.

Prisca said during the sentencing hearing that the scheme involved a “colossal abuse” of Coinbase’s trust, adding that attempts to cover it up showed Wahi and his associates knew their actions were wrong.

It is one of several cryptocurrency-related cases brought by US prosecutors in New York, including one against FTX founder Sam Bankman-Fried, who has pleaded not guilty.

Prosecutors said Wahi shared confidential information with his brother Nikhil and their friend Sameer Ramani about digital assets to be listed on Coinbase, one of the world’s largest cryptocurrency exchanges.

The tip allowed the three men to make $1.5 million by trading 55 digital assets prior to the listing announcements between June 2021 and April 2022, according to prosecutors.

Nikhil Wahi had pleaded guilty in September to wire communications conspiracy, and in January he was sentenced to 10 months in prison. Ramani is still at large.

In Tuesday’s hearing, Ishan Wahi expressed remorse for his actions and the impact on his friends and family, many of whom are in court.

Wahi said, “I made a huge mistake that will follow me for life.”

Assistant US Attorney Noah Solwijk said during the hearing that Wahi’s behavior was “not a one-off mistake” but rather a series of tips over 10 months.

Wahi had asked in court papers for a sentence no higher than his brother’s, citing other insider business cases that resulted in little or no jail time.

Prosecutors have called for Ishan Wahi to serve more than three years in prison to deter other cryptocurrency insiders from misusing company information.

Prosecutors can charge fraud in cases where deception was used to obtain financial gain, regardless of the type of assets involved. This gives the US Department of Justice more latitude to pursue cryptocurrency-related wrongdoing than its civilian counterpart, the US Securities and Exchange Commission, which is limited to monitoring stock markets.

The SEC has argued in lawsuits, including one it filed against Ishan and Nikhil Wahi over their trades, that many digital assets are securities. Court papers showed that Ishan Wahi and the SEC have reached an agreement in principle to settle the claims, while Nikhil Wahi and the SEC are in settlement talks.

Coinbase said it does not list any securities.

(Reporting by Judy Godoy and Luke Cohen in New York; Editing by Will Dunham

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