In the first insider trading case involving cryptocurrencies, a crypto trader was convicted of insider trading in federal district court and recently sentenced to 10 months in prison.

The defendant, Nikhil Wahi, pleaded guilty in the U.S. District Court for the Southern District of New York to illegally trading on information tipped by his brother, a former Coinbase product manager. According to his plea, Wahi used that information to trade on 40 different kinds of crypto assets were scheduled to be listed on the Coinbase platform between April 2021 and July 2022, when he was arrested. Prosecutors alleged that Wahi used those tips to sell crypto assets for a profit. Under the terms of the plea agreement, Wahi agreed to serve ten months in prison. Wahi’s brother, Ishan Wahi, has pleaded not guilty and is due to appear in court in March.

While insider trading is hardly an uncommon charge, the conviction represents the first insider trading conviction in the cryptocurrency market – but it is unlikely to be the last. Following Wahi’s guilty plea, the U.S. attorney for the Southern District remarked that the sentence “makes clear that the cryptocurrency markets are not lawless.”  Indeed, ever increasing scrutiny over the crypto industry has come from both prosecutors– including in the infamous FTX case – but also in the regulatory context. Just this past summer, the U.S. Commodity Futures Trading Commission Chairman urged congressional action on crypto regulation, while the SEC Chair Gary Gensler has been clear that he plans to use the SEC’s powers to increase oversight of the crypto industry, including in enforcing conflict of interest laws.

Wahi’s conviction appears to be the latest in a series of government actions seeking to increase oversight of the cryptocurrency market – and deter possible criminal activity. While his insider trading conviction follows longstanding enforcement theories, the government could use novel approaches as it grapples with how to regulate the emerging crypto industry. This possibility underscores the important role that outside counsel can play in helping companies and individuals succeed in the crypto market while minimizing prosecutorial risk.

Posted in Corporate Governance, Financial Services, Fraud, Securities Litigation, White Collar
Tags: crypto assets, crypto market, crypto regulation, cryptocurrency, financial fraud, Insider Trading, Securities Regulation, U.S. Commodity Futures Trading Commission, U.S. District Court for the Southern District of New York
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Photo of Julia Alonzo Julia Alonzo

Julia Alonzo is the Litigation Department Legal Director.  She works closely with the department’s co-chairs to manage its business and operations, and works with the entire department to execute on its strategic plan.  As a long-time Proskauer lawyer, and an accomplished member of…

Julia Alonzo is the Litigation Department Legal Director.  She works closely with the department’s co-chairs to manage its business and operations, and works with the entire department to execute on its strategic plan.  As a long-time Proskauer lawyer, and an accomplished member of its Litigation Department,  Julia has taken on an additional firm-wide leadership role that focuses on building a community that  provides fair opportunities for women attorneys across all departments and at all stages of their careers.

Julia also serves on the Firm’s Hiring Committee and Summer Program Committee.

Until 2024, Julia was a Senior Counsel in Proskauer’s Litigation Department, with a focus on securities, corporate governance, and restructuring litigation.

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Photo of Michael Guggenheim Michael Guggenheim

Michael Guggenheim is an associate in the Litigation Department and a member of the Securities Litigation and White Collar Defense & Investigation groups. He focuses on a wide range of business disputes and regulatory and investigative matters, including enforcement actions brought by the…

Michael Guggenheim is an associate in the Litigation Department and a member of the Securities Litigation and White Collar Defense & Investigation groups. He focuses on a wide range of business disputes and regulatory and investigative matters, including enforcement actions brought by the SEC and state attorneys general. In connection with the historic restructuring of Puerto Rico’s debts, Michael is a core part of the team that advises the Financial Oversight and Management Board for Puerto Rico on a variety of issues related to Puerto Rico Oversight, Management, and Economic Stability Act, including advising the Oversight Board on statutory and regulatory developments.

Michael has experience with every stage of litigation, including taking depositions, drafting dispositive and discovery motions, coordinating discovery, preparing witnesses for testimony, and drafting appellate briefs. He has represented clients in both state and federal courts, as well as in arbitrations and government investigations.

Michael maintains an active pro bono practice, which has included litigating against the State of New York to invalidate regulations that would circumvent statutorily mandated protections for children placed in foster care. In addition, he spent a five-month secondment at the New York City Law Department in the Administrative Law and Regulatory Litigation Division.

Michael earned his J.D. from Harvard Law School and his B.A., summa cum laude, from Rutgers University. While in law school, Michael worked for the Litigation Department of the San Francisco City Attorney, was a teaching assistant for the Harvard Law School Negotiation Workshop, and litigated election law cases with Common Cause. He also served as the Executive Managing Editor of the Harvard Law & Policy Review and coached the Boston College mock trial team. In his free time, Michael enjoys practicing yoga.

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