Back in July, a former product manager at Coinbase Global Inc. was arrested for allegedly providing insider information to help his brother and a friend purchase crypto tokens before they were listed on the Coinbase exchange.
Now the Department of Justice (DOJ) has announced a guilty plea from the brother of the former product manager. This marks the first guilty plea in the first-ever cryptocurrency insider trading case.
What exactly happened to lead to claims of cryptocurrency insider trading?
Coinbase has developed a name for itself as a safe, professional and reliable platform for all things cryptocurrency. Users can hold digital currency through the platform and conduct transactions involving digital currency. Coinbase has become the largest platform for such transactions in the United States.
However, the Securities and Exchange Commission (SEC) alleges that several employees, including the former product manager, used their industry access and knowledge to engage in insider trading.
For many cryptocurrencies, a listing on Coinbase would greatly help legitimize the currency and therefore drive the price up substantially. According to the SEC, by tipping off his brother and a friend when tokens were about to be listed on Coinbase, the former product manager helped the other two parties turn a massive profit.
The SEC claims that the former manager knew his actions were questionable, as evidenced by the use of a foreign phone to communicate with the other two parties involved. Federal prosecutors charged all three parties with wire fraud and conspiracy to commit wire fraud, and the SEC has accused all three of insider trading.
Sound legal counsel is crucial
Digital assets like cryptocurrency are still new enough that traders and investors may be unsure of when financial regulations apply. The SEC and DOJ are now clarifying some lines that professionals may want to avoid crossing. If you have questions or concerns about legal exposure related to cryptocurrency or other matters of securities law, we encourage you to contact the securities law attorneys at Ford O’Brien Landy LLP. With offices in New York City and Austin, Texas, we advise and represent clients nationwide.
Source: United States Department of Justice, “Tippee Pleads Guilty In First Ever Cryptocurrency Insider Trading Case,” Sept. 12, 2022