A FORMER Coinbase Global manager admitted participating in a scheme to trade on confidential information about when the exchange was going to list new tokens.

Ishan Wahi pleaded guilty to two counts of conspiracy to commit wire fraud on Tuesday (Feb 7) before US district judge Loretta Preska. His plea came just a little less than a month after his brother, Nikhil Wahi, was sentenced to 10 months in prison for trading on tips given to him by his sibling.

“I’m very sorry for what I did and I deeply apologise,” Ishan Wahi said in court on Tuesday.

Prosecutors agreed to federal guidelines that call for him to serve 36 to 47 months in prison when he is sentenced on May 10. He had faced as much as 20 years behinds bars on each count if convicted at trial.

The case against the Wahis was the first to charge insider trading in the cryptocurrency space, according to prosecutors. Coinbase, the largest US trading platform for digital currencies, allows users buy and sell more than 150 tokens, which can often see a rush of interest immediately after they are included on the exchange.

According to the indictment, Ishan Wahi passed tips about new offerings to his brother and a friend, Sameer Ramani, between July 2021 and May 2022. The two tippees used anonymous Ethereum wallets to buy cryptocurrencies before Coinbase announced they were to be listed on the exchange, allowing the group to make about US$1.5 million in profits.

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Ramani hasn’t appeared to face charges in the case.

Wahi was arrested in May right before boarding a one-way flight to India. The day before, he had been summoned to Coinbase’s Seattle headquarters for a meeting with the exchange’s director of security operations.

He told Preska that he knowingly conspired with others to misappropriate confidential information about future listings that he knew would be used to trade tokens ahead of their placement on the exchange. While he didn’t believe that any of the tokens are securities, Wahi said he knew that it was wrong to misappropriate and disseminate Coinbase’s confidential information.

Whether or not cryptocurrencies are securities and subject to federal regulation is a major point of contention in litigation involving the industry, and Wahi’s attorneys had argued that the case isn’t insider trading because it doesn’t involve securities or commodities.

David Miller, an attorney for Ishan Wahi, had also contended that the information his client is alleged to have misappropriated isn’t confidential because the tokens that are to be listed on the exchange are all tested on the blockchain first and such tests are widely known by purchasers and can be detected.

Miller declined to comment after the plea on Tuesday but noted he’s still fighting a parallel case against Wahi by the Securities and Exchange Commission. In a filing last night, Miller said the SEC “is trying to seize broad regulatory jurisdiction over a massive new industry”.

Miller also represents Nathaniel Chastain, a former product manager at the NFT marketplace OpenSea charged with insider trading, and has made similar arguments in that case. BLOOMBERG