[HN Gopher] Former Coinbase PM charged in cryptocurrency insider...
___________________________________________________________________
Former Coinbase PM charged in cryptocurrency insider trading
tipping scheme
Author : tempsy
Score : 415 points
Date : 2022-07-21 15:19 UTC (7 hours ago)
(HTM) web link (www.justice.gov)
(TXT) w3m dump (www.justice.gov)
| iryntyis3 wrote:
| romellem wrote:
| Wow, the indictment references [this tweet][1] that caused
| Coinbase to investigate the matter and ultimately led the
| defendant in being caught at the airport before trying to leave
| the country.
|
| > On May 11, 2022, Coinbase's director of security operations
| emailed ISHAN WAHI to inform him that he should appear for an in-
| person meeting relating to Coinbase's asset listing process at
| Coinbase's Seattle, Washington office on Monday, May 16, 2022.
| ISHAN WAHI confirmed he would attend the meeting.
|
| > On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a
| one-way flight to India that was scheduled to depart the next day
| shortly before ISHAN WAHI was supposed to be interviewed by
| Coinbase. [...] Prior to boarding the May 16, 2022 flight to
| India, ISHAN WAHI was stopped by law enforcement and prevented
| from leaving the country.
|
| [1]: https://twitter.com/cobie/status/1513874972552355846
| Mo3 wrote:
| How did they manage to intercept him at the airport? Are there
| lists for _suspected_ criminals?
| smsm42 wrote:
| There are "no fly" lists, and I presume there are lists of
| "if this person shows up at the airport checkin, inform the
| police" lists. Also, DHS has Passenger Name Record (PNR) for
| everybody who flies internationally at least. It'd be trivial
| to put a flag on it for a person, and then just meet him at
| the gate.
| paulpauper wrote:
| often the feds will surveil someone for a long time and just
| wait until they try to leave the country . it makes it much
| easier than trying to do the arrest elsewhere. it's all
| electronic . You buy a ticket, show your ID/passposrt, and
| your info will go out.
| acchow wrote:
| So you should really drive to central america, I guess?
| thehappypm wrote:
| My dad always said, if shit hit the fan, he would go to
| Brazil. Brazil isn't exactly lawless, but it's such a
| mass of humanity and so many cultures blending together
| that literally nobody would stick out like a sore thumb
| there.
| Mo3 wrote:
| I met a guy living in Brazil once while I was staying at
| a hotel for work, he said he moved there specifically
| because he had enough of the governments reach into his
| personal matters.
|
| Two days later, his (Brazilian) bank started to withhold
| his (non-Brazilian) salary payments for money laundering
| suspicions because he forgot to file one random document,
| he was frantically trying to find a way to open a bank
| account here in Europe, no one would let him with his
| Brazilian residency, and he had to resort to asking his
| wife for money. Another two days later, his lawyer told
| him to get lost because the Brazilian tax office knocked
| at his office door, he lost the preliminary court case to
| get his (to begin with, legal) money back, was stranded
| in Europe and they went to detain his wife. He couldn't
| even open a cryptocurrency exchange account because not
| even they want to deal with the Brazilian authorities and
| the only ones operating in Brazil itself are on the
| governments leash.
|
| It's not lawless at all. He also told me they have a
| personal identification number like the US SSN, but that
| it's much more widely used for almost anything, even if
| you want to rent an apartment or go shopping (his words,
| never verified it) and allows authorities to track their
| every (mostly financial) step. He emphasised you better
| have that number ready when you enter the country too.
| smsm42 wrote:
| They probably have computers on the outgoing checkpoint
| too. Maybe walk across Rio Grande or something. Or just
| go to Florida and swim for a really long time.
| profmonocle wrote:
| > They probably have computers on the outgoing checkpoint
| too.
|
| Does the US have outgoing checkpoints on its land
| borders? I thought you only dealt with the
| Canadian/Mexican customs agents on your way out, and only
| dealt with US CBP on your way back in. (I haven't crossed
| a US land border since a road trip to Canada when I was a
| kid, so I could be very wrong.)
| rory wrote:
| I've crossed three land borders to Canada in the past few
| years and none had an outgoing checkpoint.
| paulpauper wrote:
| it was too late for him.
| acchow wrote:
| How can you stop someone driving to mexico? They can
| drive to a border city and walk across without any
| passport control.
| paulpauper wrote:
| It depends on the stage of the investigation. if he was
| only a suspect then could he leave whenever he wanted.
| However, if someone is already indicted but it's sealed,
| then he would have been under watch without anywhere to
| go. Or he could hve been stopped and brought before a
| magistrate. HIs mistake was he waited too long, probably
| should have left in april before the evidence came out,
| not May.
| jacquesm wrote:
| His mistake was to make those trades.
| otikik wrote:
| No. Purchase a plane ticket first. Then leave by car.
| biometry-woof wrote:
| The irony here is that the linked Twitter account made his
| money by coordinating pump and dumps back in the day, before he
| rebranded into this entity.
| perihelions wrote:
| There was an HN thread about that tweet, at the time that it
| was tweeted:
|
| https://news.ycombinator.com/item?id=31012462 ( _" Insider
| Trading at Coinbase (twitter.com/cobie)"_) (3 months ago, 333
| comments)
| d--b wrote:
| During which conversation a fairly large number of HN
| commenters thought that crypto insider trading wasn't
| illegal:
|
| https://news.ycombinator.com/item?id=31012837
| closewith wrote:
| That's a fantastic insight - thanks for the link.
| hailwren wrote:
| If you read the actual SEC filing, you'll note that they're
| only filing for 7 of the alleged 25 coins that he traded.
| [1] Even the SEC agrees that this was not insider trading
| in all 25 instances.
|
| "Throughout the relevant period, Nikhil and Ramani
| repeatedly traded ahead of Coinbase listing announcements,
| trading in at least 25 tokens. At least seven of the
| listing announcements described above involved crypto asset
| securities"
|
| 1 - https://www.sec.gov/litigation/complaints/2022/comp-
| pr2022-1...
| iskander wrote:
| Is there a list of all 25 somewhere? This could provide
| some illumination on what SEC does and does not consider
| a security.
| tyre wrote:
| For some nuance, though, partly this has to do with lack of
| SEC enforcement on crypto as a security. My opinion then
| would have been that this should be insider trading, crypto
| should be classified as a security, and _also_ that I
| wasn't sure the SEC would classify this as insider trading.
|
| Since the definition of insider trading is kind of,
| "whatever the SEC enforces", it's possible to believe that
| this is a security that was insider traded and also that
| it's not "insider trading" in the only meaningful way (the
| SEC way.)
| game-of-throws wrote:
| Yeah I was about to say something similar. Our existing
| insider trading laws don't quite fit this situation,
| which is why they're being charged with "wire fraud
| conspiracy" instead of something more specific.
| [deleted]
| zionic wrote:
| Wow, not that I would ever do anything like this... but if I
| was accused of such a thing the last thing I would do is book a
| flight for _tomorrow_.
| paulpauper wrote:
| There was no way they were going to let him leave the
| country, no matter when he booked the flight. booking the
| flight made it easier to arrest him. the meeting was set-up
| by the feds to arrest him there instead, but he thought that
| leaving the country would work, which it obv. didn't.
| devmunchies wrote:
| > There was no way they were going to let him leave the
| country, no matter when he booked the flight
|
| whatever his friend did is working so far. still at large.
| zionic wrote:
| I mean I don't intend on ever being a fugitive lol, but do
| they even check ID digitally when crossing the southern
| border on foot?
| kepler1 wrote:
| Yeah, maybe book a flight for 1 hour from now and hope they
| don't find out in time...
| umeshunni wrote:
| that wouldn't have given him time to pack 3 suitcases.
| lowdest wrote:
| If I've learned anything from reading espionage fiction
| novels -- you book a flight for tomorrow and leave on the bus
| _tonight_.
| mandeepj wrote:
| > the last thing I would do is book a flight for tomorrow.
|
| Maybe, that was his 'last thing'
| koolba wrote:
| Much better to drive across the border and _then_ book a
| flight with a non-US airline.
| walrus01 wrote:
| He could've taken out cash from his local bank account,
| turned off his phone, driven to San Ysidro and walked
| through the public turnstile into Tijuana. And then tried
| to get a flight from Mexico City to somewhere in south
| asia.
|
| Would have been much better than going through the
| US/Canada border which has a full data sharing agreement
| between CBSA and US CBP/ICE.
|
| (note: this is a stupid, humorous theoretical, not real
| advice on how to flee to avoid prosecution)
|
| also, a note, any airline flight that crosses US airspace
| submits its passenger manifest to US CBP/ICE/DHS
| electronically as a database transfer, this has been a
| thing for 20+ years as a result of 9/11 and the PATRIOT
| act.
| thehappypm wrote:
| Taking a large sum of cash would have probably been a
| trigger for the folks surveilling him, though. Maybe he
| could get away but that is going to trigger something.
| jsemrau wrote:
| Why the need for the large amount of cash? It's not that
| you can't access banking websites from abroad. Sure, his
| bank accounts might be frozen or off-boarded as a result
| of the investigation. But in general, you can always
| transfer your money and don't need to bring cash.
| notahacker wrote:
| If you're expecting someone to call the police during or
| after the meeting where they ask you about the crimes you
| committed against them, you probably want to obtain
| enough spending money before you're officially a
| fugitive, rather than hope they won't cancel your credit
| card or use it to find out where you are in the coming
| days.
|
| Though you'd have thought someone committing financial
| crimes in the _crypto_ industry might have more scope for
| planning their offramp
| victorvosk wrote:
| From his perspective he could have believed it was just
| coinbase connecting the dots and he was just going to leave
| since they, if alone in their investigation, effectively had
| no immediate power over him.
| SilasX wrote:
| Haha, and the first reply to that tweet is complaining that the
| SEC is ignoring this while shackling another Coinbase venture.
| That didn't age well!
|
| https://twitter.com/ChainLinkGod/status/1513926481486909442
|
| Edit: Quoting in case it gets deleted:
|
| >>While the SEC was very swift in shutting down Coinbase Lend
| for DARING to provide 4% yield
|
| >>They'll do absolutely nothing about this situation because
| they are a corrupt organization that wants to see the average
| American stay poor
| paulpauper wrote:
| it goes to show how the gov. takes this sort of crime
| seriously, contrary to the popular belief that the SEC is
| ignoring insider trading. if the pieces are there, they will
| take action.
| SilasX wrote:
| To my discredit, I was one of those people. I stand
| corrected.
| [deleted]
| paulpauper wrote:
| It's amazing how they already had tabs on this guy and just
| waited for him to leave but without arresting him sooner
|
| if you think you broke the law and want to avoid arrest, stay
| away from the airport.
|
| anyone who buys a ticket they get your full info and then the
| arrest is as easy as picking you up at the gate, nowhere to
| hide.
| asveikau wrote:
| I wonder if the request to show up at the Seattle office was
| some kind of working with law enforcement. Evidently he
| planned to flee to India instead of take the meeting. He
| seems to have known there was risk to him in that meeting.
| paulpauper wrote:
| it 100% was set up
| rglover wrote:
| So hire a Coyote into Mexico on foot. Got it.
|
| _For my assigned agent: this is not an admission of guilt,
| just curiosity and information collection. Carry on._
| tmp_anon_22 wrote:
| I wonder if the Tweet Account was fed info from someone in the
| accused's circle who didn't get their cut.
| NelsonMinar wrote:
| What is happening here? This link is to stacker.news, a HN-like
| website. It's for a story that is another active top story
| already on HN.
|
| Are folks just commenting on the headline without even clicking
| the link?
| kerblang wrote:
| Should I give a link to the other one even though it's
| currently listed _right under_ this story? Heck why not...
| occasionally the crypto discussions are intelligent...
|
| https://news.ycombinator.com/item?id=32180428
| lizardactivist wrote:
| There's been a lot of shakedowns and refurnishings in the crypto
| landscape lately. The US seems to catch or point fingers at
| people left and right. Why is this happening now all of a sudden?
| nathanaldensr wrote:
| Well, it has to happen at _some_ point, right? Considering the
| fraud and scams are so blatant and obvious?
| jamiek88 wrote:
| The wheels of government grind slowly but inevitably.
| nyokodo wrote:
| > Why is this happening now all of a sudden?
|
| While the irrational exuberance is in full swing no one cares
| about fraud, they just want to keep the cash flowing. Once the
| crash starts that's when suddenly all that bad behavior gets
| put in the spotlight.
| wmf wrote:
| You're mixing two things. There has been a run of bankruptcies
| recently caused by the crypto price crash which itself was
| caused by macroeconomic factors. There has also been a slow but
| steady series of crypto enforcement actions over the last five
| years or so.
| runako wrote:
| Am I reading the indictment correctly that they are actually
| being charged with defrauding Coinbase, and that they are not
| being directly charged with insider trading?
| bogota wrote:
| About time this happened. It has been widely known for a long
| time.
|
| Crypto does not mean no regulations. Anyone who thinks that is
| likely a teenager who has not seen what happens to the average
| person when none exist.
| misiti3780 wrote:
| I'm surprised they were table to track the laundering, given it
| sounds like they used a lot of different wallets.
| kkielhofner wrote:
| Companies like Chainalysis and TRM have contracts with almost
| every federal law enforcement agency. They make this kind of
| analysis almost trivial.
| WJW wrote:
| I wonder how many wallets you would need before it becomes a
| problem to track. I would guess in the millions or more since
| graph algorithms are pretty efficient these days.
| aaaaaaaaaaab wrote:
| How long of a linked list do you need to be unable to reach
| its tail?
| mccorrinall wrote:
| There are exchanges which allow transactions from e.g
| bitcoin to monero. As soon as you're on such a private
| chain, you most likely broke the link.
| WJW wrote:
| I was thinking more along the lines of a directed graph
| where each of the wallets pass the funding received to
| multiple other wallets before the money finally converges
| to a destination wallet, it doesn't have to be a straight
| linked-list style line of wallets.
|
| In any case, the transaction costs alone probably makes
| this prohibitive for more than a few dozen wallets.
| voakbasda wrote:
| And there is the issue that what is inefficient today may
| become efficient tomorrow. The blockchain will be there
| waiting for new forensic techniques.
| nus07 wrote:
| Curious about what would have happened had the protagonist
| managed to board the flight to India and get there ? Would the
| SEC and Coinbase been able to extradite or do anything then ?
| zerkten wrote:
| The US and India have an extradition treaty
| (https://www.state.gov/wp-
| content/uploads/2019/02/12873-India...).
| walrus01 wrote:
| I would rate the chances of an Indian (or Pakistani, or
| Bangladeshi) national being able to evade capture
| domestically in their home country in south asia as quite
| high.
|
| In either country you can exist entirely in a cash-based
| economy with no digital records of your actual identity
| linked to any transactions or accounts if you put a bit of
| effort and thought into it.
|
| Unless the fugitive was high enough profile that it would
| cause the US to really put pressure on the relevant local
| government to search out and capture them.
| codegeek wrote:
| "cash-based economy with no digital records of your actual
| identity linked to any transactions or accounts"
|
| Not that easy in India anymore for last few years with
| thinks like Aadhar/PAN card and almost every bank requiring
| those. Even small time vendors prefer payment using phone
| apps these days in India.
| walrus01 wrote:
| If someone had cooperative family members that could
| withdraw cash banknotes from their own accounts it would
| definitely be a lot easier.
|
| have also seen a large number of reports of how easy it
| is to get a fraudulent aadhar card under a fake name,
| using fabricated paper documents as origins of identity,
| so that's a possible route
|
| I think the likelihood of this working would also be much
| higher if someone relocated to a very rural location
| where the local economy is much more cash based. (eg: if
| you're from manipur, go find a medium sized town in the
| hills and don't draw any attention to yourself)
| lebed2045 wrote:
| there's billion dollar telephone scam industry. How many
| of these criminals were ever prosecuted or get extradited
| to US?
| jmoak3 wrote:
| This is nothing new for Coinbase employees:
|
| https://bitfinexed.medium.com/coinbase-insider-trading-litec...
| hubadu wrote:
| That was a painful read. An "investigation" made by an
| anonymous twitter user based on cherry-picked tweets, hearsays
| and full of speculations. Many factual errors as well he didn't
| sell at all time high and the timeline doesn't match either.
| The claim regarding Litecoin increase and a supposed Bitfinex
| escape is made up as well.
| jmoak3 wrote:
| This is nothing new for Coinbase employees:
|
| https://bitfinexed.medium.com/coinbase-insider-trading-litec...
|
| I recommend caution to crypto engineers - the world loves you
| when you make people rich, and the world might be willing to
| excuse shady behavior for a brief time.
|
| When things sour shady people will get what they deserve, and the
| metaphorical mob will come for their associates/companies.
| jqpabc123 wrote:
| _I recommend caution to crypto engineers_
|
| Fraud is everywhere in crypto but it has very little to do with
| *crypto engineers*.
|
| In other words, lots of *engineers* are bedazzled by blockchain
| but this isn't the source or the cause of most of the fraud.
| Blockchain is just an accounting system. As this example shows,
| there are lots of way to commit fraud outside of forging the
| books.
| jmoak3 wrote:
| Follow up:
|
| https://www.cftc.gov/PressRoom/PressReleases/8369-21
| Asparagirl wrote:
| That mob is not so metaphorical...
|
| "Do Kwon, the founder of the cryptocurrency Luna and the
| stablecoin TerraUSD, has reportedly been in contact with police
| after a possible investor in the coin "trespassed" at his home,
| according to a new report from South Korea's largest newspaper,
| The Chosun Ilbo. Crypto News reports the investor lost roughly
| $1.56 million in the collapse of Luna, a claim Gizmodo could
| not independently verify.
|
| An unnamed man rang the doorbell to Kwon's apartment around
| 6:23 p.m. local time Thursday night, according to Chosun, and
| Kwon's wife answered the door. The man reportedly asked
| something like, "Is your husband home?" and then proceeded to
| run off...
|
| The unnamed man who arrived at Kwon's home faces a charge of
| trespassing because he allegedly entered the apartment complex
| by slipping through a gap in the apartment building's common
| door, according to Chosun. CCTV footage from the incident and
| surrounding area is reportedly being reviewed..."
|
| https://gizmodo.com/luna-price-do-kwon-police-south-korea-ho...
|
| See also: the Mt. Gox protestors who staked out the company's
| headquarters in Tokyo, almost a decade ago:
|
| https://www.theverge.com/2014/2/19/5425220/protest-at-mt-gox...
| H8crilA wrote:
| Why are they being prosecuted? Those are not securities, or are
| they? "Wire fraud" implies that they defrauded someone by lying
| to their own advantage over a digital channel. Insider trading is
| generally legal for non-securities.
|
| EDIT: I am not implying that they shouldn't, on a moral level.
| They should! I am asking about legal technicalities, and about
| the state of law around those issues.
| tyrfing wrote:
| Title 18 insider trading:
| https://www.yalelawjournal.org/note/title-18-insider-trading
|
| It's prosecution for "insider trading" that doesn't rely on
| anything specific to insider trading. Focus on the insider
| part, not the trading - it's about embezzlement of confidential
| information.
| yieldcrv wrote:
| Correct they are charged with Wire Fraud and Conspiracy to
| commit Wire fraud
|
| They are not charged with securities violations, despite roping
| in the Securities Exchange Commission, because the government
| is not confident that it can bring a securities violation. They
| are not charged with any statute under commodities regulations
| or consumer product fraud either.
|
| The government is using a new interpretation of wire fraud,
| because people really don't like that this action occurred and
| NFT's affected enough people.
|
| So the wire fraud is a stretch but is the most reliable catch-
| all charge they have, absent any guidance from Congress.
|
| I also think it is overly ambitious. DOJ did this a few months
| ago as well in another NFT case. In both cases they relied on
| the existence of a confidentiality agreement with the employer,
| to trigger the mapping of a financial action to a fraud
| statute.
| MR4D wrote:
| I have this same question. Crypto has not been defined as an
| asset category yet (and the SEC has not declared it to be a
| "security" so far).
|
| FTA - ". . . wire fraud conspiracy and wire fraud in connection
| with a scheme to commit insider trading in cryptocurrency
| assets. . ."
|
| I'm presuming that it's the fraud they are going after, and the
| "insider trading" aspect is verbal sugar.
|
| I can't imagine that insider trading would ever apply to real
| estate or art, so not sure why it's even mentioned here.
|
| IANAL, so perhaps someone wiser than me can add some clarity
| here?
| zamalek wrote:
| Hopefully this forces the issue and we can get some clarity
| on cryptocurrency taxation.
| pirate787 wrote:
| From another angle, he defrauded Coinbase, through violating
| the terms of employment as part of the listing team.
| fallingknife wrote:
| Wouldn't that be a civil matter between him and Coinbase?
| JumpCrisscross wrote:
| > _Wouldn 't that be a civil matter between him and
| Coinbase?_
|
| It's that, too. But fraud is a crime.
| [deleted]
| smsm42 wrote:
| Fraud is both civil and criminal matter.
| https://en.wikipedia.org/wiki/Fraud#Criminal_fraud
| H8crilA wrote:
| Right! That may be the answer.
| wmf wrote:
| "Nikhil Wahi and Ramani allegedly purchased at least 25 crypto
| assets, at least nine of which were securities, and then
| typically sold them shortly after the announcements for a
| profit." https://www.sec.gov/news/press-release/2022-127
| H8crilA wrote:
| Yeah, it may be a way to officially call at least some of
| them securities:
|
| > _" We are not concerned with labels, but rather the
| economic realities of an offering," said Gurbir S. Grewal,
| Director of the SEC's Division of Enforcement. "In this case,
| those realities affirm that a number of the crypto assets at
| issue were securities, and, as alleged, the defendants
| engaged in typical insider trading ahead of their listing on
| Coinbase. Rest assured, we'll continue to ensure a level
| playing field for investors, regardless of the label placed
| on the securities involved."_
|
| Should this go to the courts which end up deciding that they
| are in fact securities - that will be a nice precedent.
| anonu wrote:
| As Matt Levine would say - and will certainly write about
| tomorrow - Insider Trading is about theft. They stole valuable
| company information before it was publicly known to profit from
| it...
| potamic wrote:
| It's in the release,
|
| > U.S. Attorney Damian Williams said: "Today's charges are a
| further reminder that Web3 is not a law-free zone. Just last
| month, I announced the first ever insider trading case
| involving NFTs, and today I announce the first ever insider
| trading case involving cryptocurrency markets. Our message with
| these charges is clear: fraud is fraud is fraud, whether it
| occurs on the blockchain or on Wall Street. And the Southern
| District of New York will continue to be relentless in bringing
| fraudsters to justice, wherever we may find them."
|
| > FBI Assistant Director Michael J. Driscoll said: "Although
| the allegations in this case relate to transactions made in a
| crypto exchange - rather than a more traditional financial
| market - they still constitute insider trading. As alleged, the
| defendants made illegal trades in at least 25 different crypto
| assets and realized ill-gotten gains totaling approximately
| $1.5 million. Today's action should demonstrate the FBI's
| commitment to protecting the integrity of all financial markets
| - both 'old' and 'new.'"
|
| Why do you say insider trading is legal for non-securities?
| H8crilA wrote:
| > _Why do you say insider trading is legal for non-
| securities?_
|
| What, exactly, prohibits you from doing that? Certainly not
| the Securities Act of 1933 or any SEC rule.
|
| Overall maybe this is a complicated way of officially calling
| them securities and cleaning this mess on a higher level. At
| least that's what the FBI implies. However, it is not up to
| the FBI to decide what is a security, but rather up to the
| courts of law. This will be interesting.
| JumpCrisscross wrote:
| > _Certainly not the Securities Act of 1933 or any SEC
| rule_
|
| U.S. insider trading restrictions are creatures of common
| law. The '33 Act makes no mention of it. The same
| antifraud/antitheft theories enable prosecution of a
| Coinbase insider using their position to trade with
| advantage.
| theturtletalks wrote:
| Vegas uses insider knowledge for bets all the time and I
| thought it was allowed because betting slips aren't a
| security.
| [deleted]
| vishnugupta wrote:
| It talks volumes about the internal controls at CB that it took a
| tweet to expose this.
|
| Given the speed with which they grew last two years I expect
| their financial and security processes to be next to nothing.
|
| This is just tip of an iceberg. Insiders would have made tens of
| millions over last two years of bull run, if not more. This dude
| just got greedy and unlucky to get caught just as the crypto
| bubble began bursting.
| admn2 wrote:
| I was surprised to see the CSO replying to the tweet. I do
| agree with you, but do you think that was more for the PR and
| they knew about it or no way?
| Spooky23 wrote:
| Coinbase is an awful company. I signed up for a debit card for
| some reason, and it immediately became a fraud target. Someone
| tried to use it at a restaurant in South Africa, a store in
| Singapore and a mobile provider in Moldova.
|
| The card was obviously compromised, and the only reason I
| didn't lose money is that I didn't make any available. So
| called, emailed, texted Coinbase on 5 different occasions and
| they _never_ deactivated the card and didn't appear to have a
| procedure to do so.
|
| Not a place I would trust with money.
| Solvitieg wrote:
| Sounds like one of your accounts has compromised. Perhaps
| your email address?
| Twirrim wrote:
| How would email being compromised leak a debit card number?
| Can't think of any service I've used online in the last
| decade+ that would send me the full debit card number that
| way, or even make it visible when I sign in to their
| website.
| jandrese wrote:
| First rule of crypto is assume the exchange is compromised.
| Money on the exchange is always in danger, as is anything
| connected to it. They are not banks. The people running them
| are usually yahoos. They are not a save place to put money
| for any extended length of time.
| pjc50 wrote:
| A lot of people suspect there's ""official"" insider trading at
| the exchanges; there's no reason for the exchange not to front-
| run orders or fake the order book if they think they can get
| away with it. Or trade against heavily leveraged positions to
| liquidate them. Or prop-trade with the customers' money.
| [deleted]
| nullc wrote:
| If you look at the details in this case it appears that the
| actual charges are for exploiting confidential company
| information for his own gain and not insider trading.
| ChainOfFools wrote:
| Crypto people love to talk about incentives when referring to
| things like crypto adoption by the market, or corrupt actions
| on the part of incumbent powers like bankers or politicians.
|
| They are much less enthusiastic about discussing incentives
| when it comes to things like exchange operatiors front
| running their clients, centralizing forces in crypto
| generally, etc.
| pfraze wrote:
| Depends on who you're talking to, but I think the interest
| by crypto people in Uniswap suggests they're pretty aware
| of this problem and not excusing it.
| olalonde wrote:
| What makes you say that? In my experience, centralized
| exchanges are perceived as public enemy #1 by a lot of
| crypto people. They are seen as a necessary (but temporary)
| evil to bridge the "legacy" fiat world.
| [deleted]
| BolexNOLA wrote:
| > They are seen as a necessary (but temporary) evil to
| bridge the "legacy" fiat world.
|
| There is no world in which they can put that genie back
| in the bottle, so I really hope they don't actually
| believe it's "temporary."
| ETH_start wrote:
| The top decentralized exchange, Uniswap, has overtaken
| the top centralized exhanges in liquidity depth for
| several major trading pairs:
|
| https://uniswap.org/blog/uniswap-v3-dominance
|
| So there _is_ a world where centralized exchanges have
| far less relevance than they do today.
| HaZeust wrote:
| Uniswap is *so* easy to slander to the ground from
| centralized exchanges if push came to shove. It's the
| primary tool for exit scams, there's barely any
| qualifications or criteria to mint a coin, ICOs simply
| don't matter anymore - all are particularly easy points
| to hit if you're competitors fall short on handling them.
| And that's just mentioning the pragmatic on how Uniswap
| neglects fixing the BAD side of crypto, it doesn't even
| go over how Uniswap delivers only niche features on the
| good side of crypto - and doesn't do things like foster
| easier crypto buying/selling for mass adoption from the
| average person.
|
| Please, come back to me when Uniswap's market cap isn't
| 1/3 of Coinbase's.
| lottin wrote:
| Is it me or "decentralised" almost always means
| "crippled"? The critical function that exchanges have is
| to allow people to buy and sell tokens. Decentralised
| exchanges can't do that. They only allow trading a token
| for another token.
| solveit wrote:
| "Decentralized" doesn't mean crippled. "On-chain" does.
|
| At some point, you need to interact with the off-chain
| world (say, when you want US dollars and not tokenized US
| dollars), and that path to the physical world becomes a
| point of failure that can be controlled by mundane means
| such as uniformed people with guns. The crypto-utopian
| solution is to move everything on-chain. The pragmatist
| solution is centralized exchanges that more-or-less plays
| by the rules of wider society and is allowed by society
| to move stuff in and out of the blockchain.
| tromp wrote:
| Correct me if I'm wrong, but Uniswap doesn't allow people
| to buy crypto currency with fiat. It only exchanges
| between various crypto currencies. There will always be a
| need for fiat-crypto exchanges like Coinbase, that are
| centralized by necessity.
| SilasX wrote:
| Sure, but that role could be truncated to "convert
| between financial system currencies and stablecoins"
| while DeFi handles all the other work of an exchange,
| displacing centralized exchanges.
|
| And even that role might be obviated once enough people
| transact directly in the stablecoins.
|
| (Not necessarily saying it's likely, just delineating the
| hypothetical word where DeFi has maximally taken over.)
| BolexNOLA wrote:
| I just don't see it going away. Services like Coinbase
| have done more for adoption than any crypto-evangelists
| on message boards ever have if we're being honest with
| ourselves. People need it to feel familiar, and these
| pseudo-banks/stock exchange platforms feel _close enough_
| to the "real thing" that people are making the jump. I
| mean the fact that over a decade later and wallets are
| still this incredibly high-friction experience for users
| says a lot. Just having an easy place where you go "input
| debit card, get crypto," makes all the difference - and
| that's a service large exchanges have covered, thus
| locking people into their platform(s).
|
| Edit: Also, Uniswap...ehhhh. Not a great example for your
| point.
| [deleted]
| joyfylbanana wrote:
| Depends on how you use the exchanges. If you just buy and
| sell BTC and keep your coins off-exchange, there is little
| reason to care about whatever schemes the exchanges are
| doing. If you start playing with leverage, you will be
| putting much more trust at stake, and it is your individual
| decision to do that. I have been involved with BTC
| community for many years and most Bitcoiners I know do not
| trade back and forth, do not buy that much shitcoins and do
| not store their coins on exchanges, so these schemes do not
| affect them.
| pcthrowaway wrote:
| I work for a company that provides financial services to/on
| centralized exchanges, but none of us really like the
| centralization there; even if it's our bread and butter
| (for now) I think most "crypto people" are more excited
| about decentralized exchanges.
| noobermin wrote:
| This sounds a lot like a no-true scotsman...
| [deleted]
| [deleted]
| SilasX wrote:
| Say what? The whole DeFi ecosystem basically exists to
| bring transparency to operations like exchanges. With e.g.
| liquidity pools, you can see exactly what trades it's
| processing and how it handles them.
| pvarangot wrote:
| "A lot of people suspect"? Are we being overt? Am I the only
| one that not very subtly got offered insider trading of NFT
| tokens as a perk for joining a crypto company?
| xur17 wrote:
| I'd be very curious to hear more about this..
| xsmasher wrote:
| Do you mean you were offered tokens? Or do you mean you
| were explicitly offered access to non-public information
| that you could trade on?
| pjc50 wrote:
| Not my intention! I hold no crypto stake apart from the
| free Keybase one and work for a non-crypto company. But the
| fact that you read that in my message indicates that it
| _has_ been a clear part of the "offering" of crypto - that
| it's permissionless. i.e. there are no rules and no law
| enforcement.
| adrr wrote:
| It's legal for the company to do it. Not legal for
| individuals. Coinbase could have bought assets ahead of time
| and done the same thing legally.
|
| There was a case where a person had access to the credit card
| transaction data[1] and used that data to figure out sales
| prior to earning calls. That same data is available to
| hedgefunds willing to purchase it from Bloomberg. They call
| legally get a companies sales data prior to earnings and
| trade off that information.
|
| 1. https://www.reuters.com/article/us-sec-capitalone-
| insidertra...
| [deleted]
| compsciphd wrote:
| bloomberg doesn't trade on that information, heck I didn't
| work on anything financially oriented while at Bloomberg
| (worked on BLAW) and I was still restricted in the type of
| investments they allowed me to make.
|
| i.e. by definition bloomberg buying the data and making it
| available to the terminal is making the data public.
| spaceman_2020 wrote:
| Anyone who has used any leverage trading on any exchange knows
| that the exchange has visibility into your positions and will
| run your stops.
|
| Open secret in the industry.
|
| Unregulated markets promote all sorts of bad actors. And since
| the returns are wild anyway, everyone just accepts it.
| scrlk wrote:
| One incident that really stands out for me was BitMEX
| conveniently having "server issues" at one point during the
| March 2020 crash. Their liquidation engine was hammering the
| price down - then they took an outage - when they were back
| up BTC recovered.
| rmbyrro wrote:
| > Ethereum blockchain wallet "that bought hundreds of thousands
| of dollars of tokens exclusively featured in the Coinbase Asset
| Listing post about 24 hours before it was published."
|
| It talks volumes that had they done this in a privately held
| network, it might have been harder to catch them.
|
| All the "blockchain is anonymous, hence it's made by and for
| fraudsters" is a total nonsense.
| LordDragonfang wrote:
| Evidence of flaws in using software for a given use case is
| not evidence that that use case is not what was intended.
| Software can have bugs or be badly designed for its intended
| purpose, especially when it comes to security.
|
| People on this forum should understand that better than most.
| duxup wrote:
| And yet the story is about a fraudster?
| rmbyrro wrote:
| About a fraudster that was caught by a random person who
| could look at his fraud publicly, under the light of the
| sun.
|
| The part after "fraudster..." is what sets apart the
| blockchain and traditional financial networks, when it
| comes to fraud.
|
| If you commit fraud in the traditional financial system,
| only the financial institution has a chance to find it
| suspicious and tip the government agency responsible to
| investigate.
|
| In the blockchain, literally ANYONE ON THE PLANET can keep
| an eye on the fraudster.
| duxup wrote:
| >is what sets apart the blockchain and traditional
| financial networks, when it comes to fraud
|
| Are you telling me that fraudsters get caught on the
| blockchain more than other places?
| incone123 wrote:
| This might be the same problem as libre open source
| software: Anyone can search for evidence of fraud (or
| software bugs) but not many are doing so.
| georgeecollins wrote:
| This! It's so obvious from the buy / sell ratios of
| coinbase that they are fueled by millions (or 100ks) of
| small investors investing $10k or less. Joe consumer
| isn't going to sue over a bad investment. I am guessing
| that polygon, gamestop is similar. Also the counter
| parties aren't major US companies, they are often small
| to mid cap LLCs. So when the thing they push collapses
| they sort of fade away.
|
| If this were a major US company ripping off say a US
| bank, there would be investigation. But a small start up
| (I'm thinking of the issuers, not coinbase) ripping off
| people all over the world for $100- $20k with false
| promises-- it's practically a victimless crime. Coinbase
| and the exchanges aren't necessarily guilty of this but
| they are complicit.
| rmbyrro wrote:
| > Are you telling me that fraudsters get caught on the
| blockchain more than other places?
|
| I'm sorry, but I did not say "more" and "other places" in
| my comment.
|
| What I said is what I wrote.
|
| My point is: blockchain is not anonymous. The hate
| bandwagon that says fraudsters have a safe heaven for
| doing whatever they want without a slight chance of being
| caught is just fantasy land...
| duxup wrote:
| > doing whatever they want without a slight chance of
| being caught
|
| I've never heard it stated that way.
| superjan wrote:
| The fraud is there not because it is anonymous, it's there
| because crypto trade is not sufficiently regulated.
| giarc wrote:
| What could they do though? Ask all employees to provide their
| personal wallet addresses then monitor that? Seems unlikely to
| happen.
| spaceman_2020 wrote:
| Opsec in crypto funds is terrible
|
| Most serious hedge funds won't even allow you to bring your
| cellphone inside the trading pit.
| sudosysgen wrote:
| Serious hedge funds won't allow you to trade or having any
| positions that may remotely have a conflict of interest.
| chollida1 wrote:
| I mean, this is exactly what happens when you work for a
| hedge fund. You have to provide statements for all trading
| accounts you and your immediate family own.
|
| So, yeah, this is exactly what coin base should be doing.
| They should require all employees to list all account
| addresses they have access to.
|
| It's a trivial ask for the employee and its trivial to scan
| etothepii wrote:
| I worked for an investment bank for many years. We had to
| sign a declaration that we would not make trades of any
| kind without permission from compliance (the withholding of
| this permission in 2012 is why I am not a BitCoin
| millionaire). However, there was no requirement to hand
| over login details to brokerage accounts etc. I would be
| surprised if there was elsewhere.
| incone123 wrote:
| The person you replied to said 'statements' not 'login
| details'. Are you treating these things as synonymous? I
| suppose if I was only required to hand over statements I
| could edit them.
| sudosysgen wrote:
| Not login details, addresses are read only. And editing
| statements is fraud.
| incone123 wrote:
| Yes, that's why I wondered if the direct access via login
| details was intended to prevent that fraud.
| iav wrote:
| Those days pretty much all brokerages will provide a feed
| of your trading activity and open positions to a 3rd
| party compliance aggregator like ComplySci. No login
| details needed, the feed is read-only, and only has need-
| to-know information. It requires double opt in - you
| provide information to your employer, and then the
| brokerage will confirm with you that you authorized the
| feed. But if you have a weird account that doesn't
| support this system, then you always have the option of
| entering them manually and certifying that you haven't
| missed any.
| cubecul wrote:
| Actually, yes! That's what happens today
| quadcore wrote:
| _Given the speed with which they grew last two years I expect
| their financial and security processes to be next to nothing.
|
| This is just tip of an iceberg._
|
| Sounds like wild accusations to me. Id like to think the
| company executives have high integrity and maybe they caught
| others we havent heard of.
| vkou wrote:
| Undeveloped financial and security processes aren't a
| question of solely integrity.
|
| You _need_ integrity to implement them, but just having
| integrity doesn 't mean you're going to implement them, or to
| implement them correctly.
|
| You need expertise, experience, and to get burned a couple
| dozen times before your institution figures out how to do
| these things right. And even then, it's a constantly moving
| target.
| woodruffw wrote:
| Precisely. This was one actor; it beggars belief to expect that
| his is the _only_ (much less largest) instance of insider
| trading at these firms.
| SamReidHughes wrote:
| The information was on a secret chat limited to a short list of
| employees, that this one was on.
|
| There isn't any _internal_ control, short of bionic implants,
| that can prevent this.
| nathias wrote:
| very good, do politicians next
| [deleted]
| kwertyoowiyop wrote:
| Captain Renault: "I'm shocked, shocked to find that gambling is
| going on in here!"
| nullc wrote:
| Looks like the prosecution is actually over the use of coinbase's
| confidential information for personal profit. ... I suppose the
| DOJ is of the view that coinbase itself trading on this
| information was just fine.
| paulpauper wrote:
| He shoud have just made fake Saylor and Musk youtube livestream
| videos instead . Those ppl make way more money and don't caught,
| hence why the scam will never go away.
| paulpauper wrote:
| He should have just made those youtube livestream giveaway videos
| instead--the ones impersoning famous people like Michael Saylor
| and others. Those people make way more and no arrests.
| tqi wrote:
| A few hypotheticals I'm curious about:
|
| 1. If Coinbase itself had purchased a bunch of coins before
| listing on its own exchange, would that be illegal?
|
| 2. If the employee had purchased coins that were correlated with
| the ones that were listed, but not the specific ones that were
| listed, would that be illegal?
| 323 wrote:
| 1. Unlikely, it's just investing. You are expected to gain from
| your investment, to promote it, etc. Like how companies buy and
| sell their own stock all the time and it's not considered
| insider trading.
|
| 2. Yes, since the fact that the coin was to be listed was
| inside information. You will be accused of insider trading if
| you trade correlated assets. Obviously there is a threshold
| somewhere, like if you have positive insider info on TSLA and
| you invest in a passive stock market index fund.
| pvarangot wrote:
| With 1. I think it depends on intent. For example when Tesla
| purchased BTC before announcing they were taking payments to
| have some liquidity on it for financial reasons or whatever,
| then it's ok. If you can prove they are front-running the
| market because for example right after announcing they are
| listing a coin they dump what they got before listing it then
| yeah maybe that's insider trading.
|
| The thing is if they take enough measures to prevent their
| employees from doing it. It's hard considering they can do it
| on another exchange, but at least on their own exchange my
| understanding is they should prevent their employees from
| trading if they have privileged information.
| OnuRC wrote:
| https://news.ycombinator.com/item?id=30797879
|
| I asked but now we get some details, lol
| modeless wrote:
| The amounts in these insider trading schemes always seem small to
| me. $750k per person? If I had advance knowledge of all Coinbase
| listing announcements I'm pretty sure I could make more than
| that!
| notch656a wrote:
| I mean one of the dudes was flying to india. 750k is probably
| enough to buy some rural property there and live the rest of
| your life off interest. The less money, the less radar
| signature.
| time_to_smile wrote:
| At least according to levels.fyi an IC6 PM at coinbase can
| make around 500k/year in total comp.
|
| So if the goal was to acquire a bunch of rural property in
| India and live off interest it seems that just working and
| saving for a few years would be a wildly less risky route.
|
| Personally I don't think it's a good risk/reward calculus to
| try to commit potential felony offenses for levels money that
| are reasonably in line with what you could eventually get as
| your annual TC. I can understand a barista at starbucks
| committing fraud for 750k, but it doesn't seem quite worth it
| for a PM at one of the highest paying tech companies.
| anewpersonality wrote:
| He goofed. Should have left the country far before.
|
| And was found out only after a random twitter account did
| correlations
|
| How much more crypto employees are getting away with it?
| vishnugupta wrote:
| > Should have left the country far before.
|
| People just don't quit while ahead. They are confident that
| they are smart enough to keep their scheme going just a
| little bit longer. I mean 750K is almost good enough to
| retire in India and work as a freelancer or something. But
| no, they need a bigger house, bigger cars and what not.
| ayewo wrote:
| Which Twitter account was it?
| mikeyouse wrote:
| https://twitter.com/cobie/status/1513874972552355846
| TechBro8615 wrote:
| I appreciate how the top reply to that Tweet is an
| animated GIF of Speaker Pelosi rubbing her hands
| together.
|
| Note: Speaker Pelosi has not been arrested for insider
| trading
| anewpersonality wrote:
| Speaker Pelosi's insider trades are a parliamentary
| privilege!
| ingenieros wrote:
| According to Glassdoor: "The typical Coinbase Product Manager
| salary is $210,576 per year." This guy was dumb AF to risk
| losing not just his cushy tech job, but potentially even his
| right to remain in the U.S depending of his legal status.
| parineum wrote:
| 750k is a lot of money.
| tempsy wrote:
| It's definitely not when you're risking your livelihood.
|
| Total comp for a mid level PM is probably north of $400k, so
| this is less than 2 years salary.
| modeless wrote:
| Sure, but $7.5m is more money, and seems achievable. Dogecoin
| spiked 6% after its Coinbase listing announcement and Binance
| offers 50x leverage. And Coinbase listed 83 different things
| in 2021.
| greenthrow wrote:
| The bigger the amount the more likely someone will notice.
| modeless wrote:
| I doubt these guys were that afraid of law enforcement
| because nobody thought insider trading laws applied to
| crypto markets at the time. I guess they could be afraid
| that their source would get fired, but if you've already
| made 20x his salary then getting fired doesn't seem like
| a huge problem.
| greenthrow wrote:
| They could have just been scared of getting in trouble at
| work. Who knows.
| ourmandave wrote:
| Hopefully they're investigating Andreessen Horowitz (a16z) pump
| and dump business model.
|
| https://amycastor.com/2022/05/19/a16zs-state-of-crypto-repor...
| nickff wrote:
| Why are you calling it "pump-and-dump"? Is there evidence of
| them dumping? The link just says that the author thinks a16z is
| wrong and likely engaging in motivated reasoning.
| biggc wrote:
| Didn't a handful of Coinbase employees make out like bandits
| before Ethereum was listed? What's changed since then?
| O__________O wrote:
| Given the article explicitly covers the topic of an employee
| exploiting prior knowledge of what coins were going to be
| listed and when - clear the investigators were aware of the
| potential for this; if others were doing it, they must have
| done it in a way that was not obvious.
|
| If you have specific verifiable information, hire an attorney
| and use them to file a SEC whistleblower report. If your
| evidence leads to enforcement actions that are subject to their
| jurisdiction and the fines collected are over one million, you
| will anonymously get 10-30% of the fines they collect.
| bhouston wrote:
| Please explain!
| tpxl wrote:
| When a coin gets listed its price generally goes up.
| therein wrote:
| As far as I know Coinbase employees had leverage enabled for
| them when BCH was listed and they knew the whole trajectory.
| rvz wrote:
| > Didn't a handful of Coinbase employees make out like bandits
| before Ethereum was listed?
|
| I'm interested in this 'claim', Any source for that?
| Ave wrote:
| You might be thinking of Charlie Lee? Charlie Lee joined
| Coinbase, wash traded Litecoin [1] to give the appearance of
| wider interest and volume in order to get Litecoin listed on
| Coinbase, and promptly dumped all his bags at the peak.
|
| [1] https://i.redd.it/u9vhbxvr63t71.jpg
| lawn wrote:
| The best part of the story is the fervour that supporters
| defended his decision to dump his bags, because "it was good
| for the coin" or something.
| anewpersonality wrote:
| Let's admit the true problem of crypto is allowing
| sociopathic nerds to act as if they will not face
| consequences.
| ffggvv wrote:
| 99.9% haven't
| [deleted]
| hubadu wrote:
| Charlie Lee made all his fortune from selling his Bitcoin and
| Ethereum the rest is marginal. His track record regarding the
| launch, support and development of Litecoin is impeccable and
| rather unique in the space. Even half a decade after having
| no stake in the game he's still dedicating his life to
| promote and develop Litecoin.
| ffggvv wrote:
| didn't the guy who founded litecoin and worked at CB in the early
| days do the same?
| elteto wrote:
| First ever?
| bulbosaur123 wrote:
| Charged for what? There is no "insider trading" with cryptos,
| just as there isn't any with Forex, fiat currencies. He can't be
| charged, because there is no crime. No law prevents you to trade
| cryptocurrencies or fiat on insider knowledge. Might be
| unethical, but not illegal.
| choppaface wrote:
| Inside trading is fraud, no matter the security or property,
| same as with Opensea NFT case:
|
| https://www.justice.gov/usao-sdny/pr/former-employee-nft-mar...
|
| The main problem with crypto is it forces us all to have to re-
| learn why fraud is bad, and in the process it allows those in
| power to arbitrage the fraud-learning itself. Satoshi
| explicitly remarks that fraud is a critical weakness of crypto.
| Regulations and laws might suck, but when so many societies
| have adopted anti-fraud mechanisms, hey maybe that was actually
| a good idea and not something we need to re-learn?
|
| Even Roughgarden's textbook proves the vulnerabilities of
| blockchain-based mechanisms.. .. Maybe crypto advocates citing
| false straw man arguments should be considered investment
| advice and punished by the SEC as well.
| tdhoot wrote:
| The article says Wire Fraud and Conspiracy.
| aakilfernandes wrote:
| IANAL but I believe the legal theory is they stole proprietary
| information from Coinbase (information about an upcoming
| listing) and used it for personal profit. The "victims" in this
| view are NOT users of the exchange (or the broader
| cryptocurrency market) but rather shareholders of Coinbase.
| andrewljohnson wrote:
| There is actually no particular law against insider trading at
| all, not even related to equities... it's all securities and
| wire fraud.
| https://www.bloomberg.com/opinion/articles/2022-06-02/don-t-...
| dragonwriter wrote:
| > There is actually no particular law against insider trading
| at all, not even related to equities...
|
| There actually is. See, well, a whole lot of 15 USC Chapter
| 2B [0], notably provisions like 15 USC Sec. 78p (prohibiting
| certain trades by corporate insiders, and creating civil
| liability of those conducting such trades to the issuer of
| the security thus traded) and 78u-1 (authorizing civil
| penalties by the SEC for insider trading made illegal by the
| Securities and Exchange Act.)
|
| What Bloomberg probably meant to say is that there is not a
| distinct _crime_ of insider trading, but that illegal insider
| trading is generally _also_ the crime of securities fraud.
|
| [0] https://www.law.cornell.edu/uscode/text/15/chapter-2B
| jc_811 wrote:
| Everything Everywhere Is Securities Fraud:
| https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
| [deleted]
| danaos wrote:
| That is barely scratching the surface. I remember reports on
| reddit of people buying newly listed crypto assets in advance.
| That was in ~2016 and they didn't even try to hide.
| lawn wrote:
| Or how about Litecoin's creator who worked for Coinbase and
| lobbied for Litecoin to get added to the exchange?
| jmoak3 wrote:
| Yup!
|
| https://bitfinexed.medium.com/coinbase-insider-trading-
| litec...
| hubadu wrote:
| Why you keep spamming that link here? That twitter thread
| is built on a layer of conjectures with nothing tangible.
| [deleted]
| jmoak3 wrote:
| I thought it was a good summary, and that people should
| see it.
|
| Have you read the CFTC's fines for Coinbase's wash
| trading between Litecoin/Bitcoin in 2016 to pump up
| volume?
|
| https://www.cftc.gov/PressRoom/PressReleases/8369-21
|
| From the fine:
|
| >a former Coinbase employee used a manipulative or
| deceptive device by intentionally placing buy and sell
| orders in the Litecoin/Bitcoin trading pair on GDAX that
| matched each other as wash trades. This created the
| misleading appearance of liquidity and trading interest
| in Litecoin. Coinbase is therefore found to be
| vicariously liable as a principal for this employee's
| conduct.
|
| I wouldn't be surprised if Jeff here is correct in his
| guess of who did this: https://twitter.com/jeffjohnrobert
| s/status/13730545911604838...
|
| >According to the order, between January 2015 and
| September 2018, Coinbase recklessly delivered false,
| misleading, or inaccurate reports concerning transactions
| in digital assets, including Bitcoin, on the GDAX
| electronic trading platform it operated. During this
| period, Coinbase operated two automated trading programs,
| Hedger and Replicator, which generated orders that at
| times matched with one another. The GDAX Trading Rules
| specifically disclosed that Coinbase was trading on GDAX,
| but failed to disclose that Coinbase was operating more
| than one trading program and trading through multiple
| accounts.
| hubadu wrote:
| There is nothing whatsoever that says that the given
| employee is Charlie Lee. Since you are the one here
| making that claim, isn't that exposing you to slander if
| it turns out to be a false? On top of it you seem
| confused by the two different things addressed by the
| linked CFTC statement, the litecoin related thing
| (Litecoin/Bitcoin trading pair) happened in August &
| September 2016 (6 weeks total) and you are confusing it
| with the inaccurate reports during January 2015 and
| September 2018 which is a separate point.
| jmoak3 wrote:
| I included "According to the order, between January 2015
| and September 2018, Coinbase recklessly delivered false,
| misleading, or inaccurate reports concerning transactions
| in digital assets" as extra evidence that Coinbase and
| it's employees have a history of untrustworthy behavior.
| px43 wrote:
| Litecoin was the third cryptocurrency to be added, and it was
| the most obvious choice to be next, seeing as how it had the
| next highest market cap after Bitcoin and Ethereum. Before
| Ethereum was a thing, Litecoin spent a lot of time as the #2
| cryptocurrency. It was the original "altcoin". There was
| already massive demand to add Litecoin, which is probably a
| key reason that they hired Charlie in the first place.
| maerF0x0 wrote:
| What they did is definitely unethical, but I place at least some
| of the blame on the government themselves.
|
| How did "crypto" become a >$1T marketplace with so little
| legislation? Failures on multiple fronts of the US government.
| princevegeta89 wrote:
| OMG gimme a break, isn't crypto itself a huge insider-trading
| sort of market? Why is this such a big deal for Coinbase unless
| there are other intentions behind this arrest?
| fny wrote:
| Yes it is... which is why the hammer needs to come down and
| hard.
| toolz wrote:
| This is a value judgement. If you find crypto to be unfair,
| there's a very simple solution that doesn't require bringing
| in guys with guns to deal out punishment. You can simply just
| not participate.
|
| In an ideal world we could get rid of insider trading, but
| selectively punishing people just makes the problem worse and
| with so much of congress dominating the market I think it's
| quite clear the punishment is selective and itself incapable
| of being fair.
|
| It is much worse to give the illusion of fairness than to let
| people freely choose whether the "fairness" of some market is
| enough to justify participating. Of course, this is just my
| opinion.
| AlexandrB wrote:
| > This is a value judgement. If you find crypto to be
| unfair, there's a very simple solution that doesn't require
| bringing in guys with guns to deal out punishment. You can
| simply just not participate.
|
| Ok. And I assume the welfare bills of crypto scam victims
| will be paid directly by crypto companies? What about
| hospital bills from attempted suicides? If you want crypto
| to be its own special island, fine, but you have to accept
| the costs of dealing with _all_ the externalities.
| toolz wrote:
| > but you have to accept the costs of dealing with all
| the externalities.
|
| cost benefit analysis seems rather simple to me. You
| either pretend you can govern money into a better place
| using vast amounts of precious resources, such as time
| and political capital of our central planners, or you
| celebrate that no one has reasonable expectations that
| crypto is a safe market and allow it to continue to be an
| unsafe market which will either die or sort itself out
| with market pressures.
|
| We're not talking about necessary resources like food
| land or shelter here. Crypto can live or die by its own
| merits and to pretend governing into the remarkably
| unfair landscape that is modern finance is worth the
| resources necessary, seems to me, to be easily dismissed
| as anything approaching reasonable.
|
| Crypto will very likely continue to get more governance,
| but that's not good or unexpected. It's just centralized
| power doing what centralized power does, which is expand
| its power and reach.
| tylersmith wrote:
| Coinbase has an interest in not having their information
| abused, and when an employee granted access to that information
| abuses it it's fraud. It has nothing to do with crypto or
| insider trading regulations.
| throwaway29812 wrote:
| Yes. Crypto isn't a new technology it's unregulated finance.
| [deleted]
| saos wrote:
| > On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a
| one-way flight to India that was scheduled to depart the next day
| shortly before ISHAN WAHI was supposed to be interviewed by
| Coinbase. Prior to boarding the flight, ISHAN WAHI falsely told
| Coinbase employees that he had already departed for India when he
| had not. [...] Prior to boarding the May 16, 2022 flight to
| India, ISHAN WAHI was stopped by law enforcement and prevented
| from leaving the country.
|
| hahahah
| uncomputation wrote:
| Great example of how most of the fluff around decentralized
| finance being more fair just because it is public and "open" is
| naive at best and a wolf in sheep's clothing at worst. They claim
| that regulated banks are a moral evil and "wouldn't you want
| something neutral and open and transparent," conveniently
| forgetting that this will always favor those with money to
| market, attract, and sell to potential "buyers" (scam victims,
| really). Especially with the use of bots and crypto's rather
| insular and hype-driven community, it becomes dangerously easy to
| get tons of dumb money, almost entirely from people who are
| desperate enough to believe it.
| [deleted]
| null0pointer wrote:
| Coinbase is not decentralized finance, it's a centralized
| crypto bank.
|
| > the fluff around decentralized finance being more fair just
| because it is public and "open" is naive at best
|
| As another commenter pointed out, the investigation was
| triggered by this tweet [0]. How is that not more open and
| fair? If there wasn't a public record of the transactions, like
| in traditional finance, this guy would have likely gotten away
| with it.
|
| 0: https://twitter.com/cobie/status/1513874972552355846
| hackernewds wrote:
| You have a point, but also this wouldn't have been unraveled as
| easily in traditional financial systems. here's the tweet that
| is cited in the indictment, that a layman could trace (and did)
|
| https://twitter.com/cobie/status/1513874972552355846?s=20&t=...
|
| Another debate why people on Twitter can do this, but the SEC
| can't do it at scale.
| Kukumber wrote:
| Spring cleaning, about time! Unfortunately, it is too late for
| coinbase, their reputation took a massive hit, and this arrest
| came way too late
|
| The alternative to wallstreet, but with the same problems..
| bpodgursky wrote:
| Hmm. Is this actually "insider" knowledge? I personally question
| the validity of this charge. This employee had knowledge of what
| COINBASE was going to do with the currency (ie, list it). He had
| no fiduciary responsibility as pertaining to the coin itself.
|
| This is like knowing that Warren Buffer is going to say good
| thing about Microsoft tomorrow, and buying it today as a result
| (expecting it to rise). Is that actually illegal?
| ayewo wrote:
| You need to remember that Coinbase is a regulated entity like
| other financial institutions and TFA clearly mentions that the
| insider was part of a small set of employees that had access to
| info that the rest of the employees did not have access to:
|
| > _Beginning at least in August 2021 and continuing through May
| 2022, ISHAN WAHI was a member of a private Coinbase messaging
| channel reserved for a small number of Coinbase employees with
| direct involvement in the Coinbase asset listing process. The
| private channel was used to discuss, among other things, "exact
| announcement / launch dates + timelines" that Coinbase did not
| wish to share with all of its employees._
| hef19898 wrote:
| If your knowledge is privileged an non public, and might
| reasonably impact share prices either way, yes it is illegal.
| Not a lawyer, but your Buffet example above would be something
| I'd either run through compliance before traiding or I just
| wouldn't trade at all _before_ said whatever he planned to say.
|
| Source: Countless of SOX-mandatory insider trading trainings
| and falling under rules covering restricted traiding windows at
| US listed companies.
| prepend wrote:
| > If your knowledge is privileged an non public, and might
| reasonably impact share prices either way, yes it is illegal.
|
| Unless you're in the US Congress as there is an exception for
| their legislative insider info.
| hef19898 wrote:
| Rank and its privileges. It helps if you can make your own
| rules I guess...
| yjftsjthsd-h wrote:
| Okay, so obvious question: Is it legal for random Joe on
| the street to find out what trades congresspeople are
| making and mirror them?
| nathanvanfleet wrote:
| Love to see crypto people discover laws the hard way.
| seanhunter wrote:
| Your Warren Buffet example would absolutely be illegal.
|
| Trading on the basis of material non-public price-sensitive
| information or tipping someone off so they trade is market
| abuse (ie illegal) in Europe. In the US, the rules are a little
| more complex but basically yes it is illegal (if that's what he
| did).
|
| You absolutely don't have to have fiduciary responsibility, and
| you don't have to be an official insider, you simply have to
| trade on the basis of material non-public price-sensitive
| information in a product that's covered by the regulations or
| give that price-sensitive information to someone else in the
| form of a tip (with some expectation in the US of benefitting
| iirc).
| rblatz wrote:
| Then what about groups that do short reporting, they do an
| investigation into a company, take a short position, then
| release that information to the public? It sounds like that
| would fall under your definition.
| seanhunter wrote:
| The research they did would be obtainable from public
| sources rather than being classified as material non-
| public. That said, if you worked for (say) Pershing Square
| and knew Bill Ackman was about to announce a short in some
| stock and you traded it is your personal account that would
| absolutely be illegal.
| vageli wrote:
| This article [0] seems at odds with your statement.
|
| > Dirks v. SEC, 463 U.S. 646 (1983) was a pivotal U.S.
| Supreme Court decision regarding this type of insider
| trading. In Dirks, the Court held that a prosecutor could
| charge tip recipients with insider trading liability if the
| recipient had reason to believe that the information's
| disclosure violated another's fiduciary duty and if the
| recipient personally gained from acting upon the information.
| Dirks also created the constructive insider rule, which
| treats individuals working with a corporation on a
| professional basis as insiders if they come into contact with
| non-public information.
|
| [0]: https://www.law.cornell.edu/wex/insider_trading
| alasdair_ wrote:
| > Your Warren Buffet example would absolutely be illegal.
|
| My understanding is that it very much depends upon how the
| information was obtained. If I, as a third party, overhear
| Warren talking in a restaurant, that's very different from
| hearing it during a Berkshire board meeting.
|
| Of course, everything, everywhere, is securities fraud. https
| ://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
| seanhunter wrote:
| That's one of the things I was handwaving over when I said
| "in the US it's more complicated". In the context of being
| an employee and hearing the information in your job it
| would pretty much always be illegal.
| iso1631 wrote:
| If Joe Bloggs ran the autocue screen and got an advance copy
| of the speech, would it be illegal?
|
| What if he overheard Buffet practicing his speech and bought
| it - would that be illegal?
|
| If he were to tweet "I Joe Bloggs heard Buffett saying he is
| about to say something good about Microsoft" and then buy a
| few seconds later, would that be public information?
|
| When does public information change from being private
| information to being public information nobody has noticed?
| soperj wrote:
| The only instance where this isn't illegal is if you're a
| part of congress or the federal reserve.
| tylersmith wrote:
| This has nothing to do with fiduciary duty. He defrauded
| Coinbase and is being charged for that. Deliberately
| misappropriating privileged information like that is absolutely
| a crime.
| modeless wrote:
| It's not confirmed to be illegal until they get a conviction.
| So we will find out! It will be an interesting case. I'd wager
| they do get convicted but we'll see.
| gizmo686 wrote:
| There are two seperate questions:
|
| 1) Do the alledged facts meet the legal requirements for the
| crimes charged?
|
| 2) Are the alledged facts true?
|
| A trial is focused on question 2. A jury is called on to make
| a determination of the facts of the case, they will be
| instructed on what is/isn't illegal and not expected to make
| any decision regarding questions of law.
|
| Question 1 can be answered in summary judgment before you
| ever call a jury.
|
| Question 1 can also be answered through the appeals process
| long after a guilty verdict is given.
| toolz wrote:
| A jury can decide if something _should_ be illegal and base
| their verdict on that. Meaning that the jury is also
| considering point 1 and whether this specific case should
| be illegal, regardless of how clear the law is on the
| subject.
| skc wrote:
| Does the fact that he tried to flee have any bearing on this
| or can it plausibly be argued away is irrelevant?
| modeless wrote:
| Beats me, I'm no lawyer. But it seems plausible to me that
| his intention was to avoid or at least delay getting fired
| rather than intentionally fleeing law enforcement
| specifically.
| blocked_again wrote:
| > As a result of the insider trading scheme, NIKHIL WAHI and
| RAMANI collectively generated realized and unrealized gains
| totaling at least approximately $1.5 million.
|
| Is this a joke? Seriously. I thought this case was about people
| inside trading hundreds of millions of dollars.
| smsm42 wrote:
| It's nice that $1.5 million is pocket change to you, but it's
| still against the law to get even such as small - for you - sum
| by fraud, so SEC will prosecute it.
| pcwalton wrote:
| You expect to go to jail for being caught stealing $1,000 from
| a cash register. So you shouldn't be surprised when you go to
| jail for stealing $1,500,000 in cryptocurrency.
| daenz wrote:
| >On May 11, 2022, Coinbase's director of security operations
| emailed ISHAN WAHI to inform him that he should appear for an in-
| person meeting relating to Coinbase's asset listing process at
| Coinbase's Seattle, Washington office on Monday, May 16, 2022.
| ISHAN WAHI confirmed he would attend the meeting.
|
| Anyone know why Coinbase would set up this meeting if they knew
| it was him? Was it a bluff to see if he'd flee? Or were they
| setting up the arrest to happen at the office? Couldn't they just
| have arrested him in his home?
| notch656a wrote:
| I know a lot of local police like to go into homes with guns
| blazing, but the smart cops would much rather set someone up
| outside of their home where they're less likely to be armed and
| bunkered.
|
| If I were a cop arresting somebody in their home would be my
| worst case scenario IMO.
| Scoundreller wrote:
| Toronto cops are definitely the dumb kind: went to execute a
| search warrant on a gunsmith while he was in his gun workshop
| and, whodathunkit, the gunsmith reached for a (non-
| operational) gun!
|
| https://www.cbc.ca/news/canada/hamilton/rodger-kotanko-
| self-...
| ianhawes wrote:
| I doubt that Coinbase would want to arrest this person at their
| offices. I'm sure that the plan was to question the suspect
| with the FBI present. If the FBI asks a question, and you lie,
| it's a felony. If your employer asks you a question and you
| lie, it's legal.
|
| Either way, this was a ruse to get WAHI to start talking.
| Likely they would execute a search warrant at his residence
| after he left to appear in-person.
|
| As an FYI, people under investigation by federal authorities
| are added to a database that alerts agents to the purchase of
| any flight tickets (domestic or international). Unfortunately
| for the suspect this means he will undoubtedly be detained
| until his trial in several years.
| est31 wrote:
| Note that they were charged for wire fraud and wire fraud
| conspiracy. So not for actual Section 10(b) violations, aka
| insider trading.
| mellavora wrote:
| I think Section 10(b) insider trading only applies to trading
| company-issued securities based on inside knowledge of events
| related to the company.
|
| You can't "insider trade" FX, for example. Likewise, you cannot
| "insider trade" crypto.
| stingraycharles wrote:
| This may sound like a dumb question, but as a foreigner, I have
| no idea what wire fraud actually means, but I hear it pretty
| often.
|
| The explanation I found "Mail fraud and wire fraud are terms
| used to describe the use of a physical or electronic mail
| system to defraud another" doesn't really help me further,
| other than it just being "fraud".
|
| What would be the difference between insider trading and fraud,
| in this specific case? Would it mean that someone basically
| enriched themselves with Coinbase _without_ it being through
| trades (just to name an example, skimming rounding inaccuracies
| in your favor) ?
| noughtme wrote:
| US authorities often don't have enough evidence to prosecute
| for the underlying crime, or it may have low penalties, but
| they often have the evidence to prosecute for mail fraud or
| wire fraud(basically any means of electronic communication).
| Mail/wire fraud are federal offences, so this also involves
| federal prosecutors and agencies with more resources,
| surveillance abilities, and higher penalties.
| projektfu wrote:
| Fraud can be a state or federal crime, "wire fraud" usually
| means it is at the federal level because of its use of
| interstate electronic communications.
|
| Mail fraud is similar. If you send someone a letter, you're
| using the US Mail system and thus are involving the federal
| level making it a federal crime. If you exclusively use a
| private interstate letter carrier (FedEx, for example), you
| are still committing mail fraud because the law was amended
| to cover that.
| rmbyrro wrote:
| In layman's terms, wire fraud is committed when one uses a
| financial transfer in connection with or to defraud others.
|
| Nowadays, it's very hard to commit financial fraud without
| also committing wire fraude.
| NineStarPoint wrote:
| "Doesn't really help me further, other than it just being
| 'fraud'." Shows a correct understanding of what wire fraud
| is. It's an incredibly broad category, meaning basically any
| fraud that happens at distance that doesn't involve a physics
| means of communication like mail.
|
| In this case, because the trades were made via digital
| communications, it's wire fraud. The reason you hear "wire
| fraud" so much is, as you might be able to guess, the vast
| majority of fraud these days takes place over the web.
|
| In this case the indictment is "wire fraud in connection with
| a scheme to commit insider trading". So it is both wire fraud
| and securities fraud. Generally speaking, the relevant
| information will be whatever specific fraud they are accused
| of committing over the wire, and not that it is the
| incredibly generic term wire fraud.
| [deleted]
| tylersmith wrote:
| Mail/wire fraud is simply fraud that was conducted using mail
| or other communications platforms.
|
| Insider trading is specifically about rules around trading
| securities.
|
| In this case the allegation has nothing to do with securities
| trading, it's about an employee defrauding their employer by
| misappropriating privileged information.
| kepler1 wrote:
| Also conducting fraud, if it ever touches a piece of US mail,
| opens up the channel to be investigated and prosecuted via
| the US Postal Inspection service. Which I have heard, they
| are no joke.
| Spooky23 wrote:
| The problem is that separation of powers make most frauds a
| state matter. If you were ripped off in NY, a local county
| district attorney would prosecute you.
|
| The problem with that is state laws and capabilities are
| inconsistent. Even in New York, where there is a well
| established body of law for things like financial frauds, the
| local prosecutors make lack capability or venue. If you live
| in Lake Placid, NY and are scammed, it's unlikely that the
| Essex County DA (probably 4 attorneys) has the capability to
| prosecute a complex financial crime. If you live in
| Manhattan, different story - that DA has thousands of
| attorneys and expertise.
|
| The Federal government side-steps turf issues and inequity by
| using more "umbrella" laws that are easy to approve. If you
| commit a fraud that has a connection to the mail, "Mail
| Fraud". If you use a phone, "Wire Fraud". If you take money
| that isn't yours from an FDIC insured bank, that's a Federal
| crime. If you lie to a Federal agent, that's a crime.
| mjburgess wrote:
| The federal government effectively needs "legal fictions" in
| order to prosecute at the state level.
|
| The way it prosecutes fraud here is by observing that it's
| over electronic wires which cross state lines.
| googlryas wrote:
| Insider trading is (roughly) specifically about using non-
| public corporate information to make money.
|
| Fraud is generally about deceiving people. Wire fraud is
| specifically about deceiving people using telecommunications
| devices - imagine when telephones first became popular - a
| fraudster before had to go knock on every door, expose his
| face to the town, and possibly be driven out if people found
| out what he was doing. With telephones, the fraudster could
| sit in a loft in NYC and call thousands of people all over
| the country with their fraud, and there would be very little
| anyone could do to stop them.
| treis wrote:
| Note that the fraud here is against Coinbase. Namely, that
| the defendant who worked there fraudulently agreed to abide
| by non-disclosure and trading policies. The others are
| wrapped up in conspiracy charges.
|
| I think this is a pretty novel charge and IMHO isn't going to
| stick. They're going to have to prove an intent to deceive
| and deceive specifically to "insider trade". Agreeing not to
| disclose and then disclosing isn't in itself fraud. You have
| to plan to disclose prior to that agreement to make it fraud.
| perihelions wrote:
| 10b-5 is an SEC regulation, not a criminal statute.
| Administrative agencies don't have the power to define or
| prosecute crimes.
|
| It's fair to characterize these criminal charges as "insider
| trading" (I assume; the DoJ press release describes them using
| that phrase).
| nus07 wrote:
| Curious about what would have happened had the protagonist
| managed to board the flight to India and get there ? Would the
| SEC and Coinbase been able to extradite or do anything then ?
| housedrafta wrote:
| Agamus wrote:
| Asking for a friend? Or did you mean antagonist?
| treis wrote:
| The protagonist is the main/leading character in a story.
| It's not a moral judgement except in the sense that stories
| usually make the protagonist the good guy.
| TecoAndJix wrote:
| It is about perspective. The government & Coinbase are
| antagonists to the POV of the fraudster and the fraudster
| is an antagonist to the POV of the government and
| Coinbase. Since the release is from the government, I
| think that makes him the antagonist?
| bulbosaur123 wrote:
| Where is the fraud? They can't charge with insider trading,
| because insider trading does not apply to currencies or
| cryptocurrencies.
| romellem wrote:
| According to the [indictment][1], they violated [18 USC SS
| 1343][2], when they: participated in a scheme
| to deprive Coinbase of its exclusive use of
| confidential business information related to Coinbase's
| plans to list certain crypto assets on its exchanges
|
| [1]: https://www.justice.gov/usao-sdny/press-
| release/file/1521186... [2]:
| https://www.law.cornell.edu/uscode/text/18/1343
| kkielhofner wrote:
| I have a friend in federal law enforcement that deals with
| crypto and financial crimes. He explains it like this:
|
| "First, I need to get a 65 year old Federal prosecutor to
| understand what this case is about. Then, they need to be able
| to potentially argue the case in court and to a jury that
| almost always has no idea what any of this means."
|
| He goes on to say that wire fraud is essentially a universal
| catch-all charge that distills the crux/burden of the case to
| two facts:
|
| 1) They committed fraud.
|
| 2) They touched a computer while doing it.
|
| These two points are much easier to argue, prove, and most
| importantly get a jury to understand (and convict on). Even
| though most federal prosecutions result in a plea deal of some
| sort the simplicity of arguing and proving wire fraud results
| in a much higher rate of success for a favorable plea deal
| and/or the threat of going to trial with a crime that's so easy
| to prove.
| rmbyrro wrote:
| > each of which [wire fraud and wire fraud conspiracy] carries
| a maximum sentence of 20 years.
|
| So they're looking at maximum 40 years. One of them is charged
| with two counts on each, so 80 years max.
|
| It's not a light deal...
| [deleted]
| [deleted]
| Tengiono wrote:
| Soooooo people are slowly realizing that a regulated market might
| actually became regulated for a reason?
|
| I wouldn't mind all of this cryptoshit if it wouldn't be for the
| co2 and gpu/chip shortage...
| c7DJTLrn wrote:
| Unpopular opinion incoming: the concept of insider trading is
| stupid, and even more stupid applied to cryptocurrency. People
| will always find ways to profit from privileged information. The
| least careful ones will just keep getting caught while the most
| careful reap the rewards and get away with it. Cryptocurrency
| isn't even a regulated asset, how can someone be 'insider
| trading' it?
|
| What insider trading really means is a middle class person
| profiting in a way the ruling class don't like. Apparently it's
| legal for Congress to insider trade. It's legal for CEOs to
| insider trade.
| ouid wrote:
| trading on information asymmetry is usually referred to as
| fraud. insider trading is just a subcategory that is relatively
| easy to prosecute and prevent
| karpierz wrote:
| By this same logic, fraud shouldn't be a crime. People will
| always find a way to profit by misleading people, and the most
| careful ones will reap the rewards and get away with it.
| skidd0 wrote:
| Knowing privileged info and acting on it as an individual is
| not he same as intentionally misleading another person.
| pavlov wrote:
| In a market that promises information symmetry, there's no
| difference between the two.
| Dracophoenix wrote:
| That's incorrect. Due diligence is expected of any person
| who enters a contract. This forum was recently poopooing
| Musk for violating his purchase contract even though he
| may have had legitimate concerns of Twitter keeping
| secret its number of bot accounts. If you want to make
| the case that the ignorance of one party is sufficient to
| accuse the other of fraud, the burden of proof is on you.
| tylersmith wrote:
| When you gain that information under the understanding you
| won't abuse it, solely for the purposes of abusing it, you
| have committed fraud.
| j0hnyl wrote:
| Who is the victim here?
| munificent wrote:
| It is a shared good that benefits all participants for a
| market to be efficient. Insider trading reduces market
| efficiency.
| siftrics wrote:
| It literally does the opposite. It pushes the price in
| the direction it's going to go when the information is
| made public.
| munificent wrote:
| You're only thinking of the first-order effect.
|
| If insider trading is allowed then, yes, those who have
| access to inside information can trade on it more
| efficiently. But it also _highly incentivizes market
| participants to hide information_. In a world where
| insider trading is allowed, anyone who has access to
| inside information can now personally monetize it as long
| as that information does not get out to the wider market.
|
| You're basically paying people to manufacture information
| asymmetry. As an emergent effect, that does not lead to
| the widely available information needed for a market to
| perform efficiently.
| siftrics wrote:
| How will they profit if the information never becomes
| public?
| idiotsecant wrote:
| The victim of insider trading is everyone else
| participating in the market that is not insider trading.
| Which, given the widespread reliance on 401k's for most of
| our accumulated wealth, is all of us.
| j0hnyl wrote:
| But crypto is not an equity and your 401k is not tied up
| in it at all?
| tylersmith wrote:
| Coinbase. It's in the indictment.
| j0hnyl wrote:
| Maybe I'm dense... but how does Coinbase lose money from
| this?
| valvar wrote:
| >Apparently it's legal for Congress to insider trade. It's
| legal for CEOs to insider trade.
|
| I'm pretty sure it isn't.
| drexlspivey wrote:
| https://nypost.com/2022/07/16/paul-pelosi-buys-tech-chip-
| sto...
| snarf21 wrote:
| The point is that they can be caught and then prosecuted. It
| won't stop it but it makes it harder. People will always break
| the law. The point is to make that harder and have a punishment
| for doing so. We need better laws to prevent lawmakers from
| profiting as well.
| judge2020 wrote:
| > Cryptocurrency isn't even a regulated asset, how can someone
| be 'insider trading' it?
|
| Because the FTC says it's a regulated asset and they have the
| world's largest country to enforce this with courts and police
| action.
| KoftaBob wrote:
| For a free market to have "perfect competition", one of the
| requirements is that "Buyers have complete or perfect
| information (in the past, present, and future) about the
| product being sold and the prices charged by each firm."
|
| Information asymmetry is a big factor acting against a free
| market that is "perfectly competitive". In the US, commerce
| regulations are more or less meant to to push the market as
| close as possible to this theoretical state of perfect
| competition.
|
| Insider trading, front running, or any similar forms, directly
| act against this goal and increase information asymmetry.
|
| https://www.investopedia.com/terms/p/perfectcompetition.asp
| endisneigh wrote:
| This logic is dumb. Scams also should be legal I guess? As well
| as theft.
| c7DJTLrn wrote:
| Never said it should be legal. I said it was stupid as a
| concept.
|
| The alternative is to reform the market so it's a level
| playing field for everyone regardless of what you know.
| avisser wrote:
| > reform the market so it's a level playing field for
| everyone regardless of what you know
|
| You want to take away the power of knowledge? Good luck in
| human society. (Honestly, on its face, this is an
| incredibly naive take.)
| InefficientRed wrote:
| The solution to the issues you identify, which are real, is to
| improve the equitabiliy of the US justice system and strengthen
| laws against insider trading.
|
| _> The least careful ones will just keep getting caught while
| the most careful reap the rewards and get away with it._
|
| The clearance rate for homicide in the USA hovers somewhere
| between 50% and 70% most years, and the clearance rate for rape
| in the US is much lower at 32% in 2018.
|
| _> What insider trading really means is a middle class person
| profiting in a way the ruling class don 't like. Apparently
| it's legal for Congress to insider trade. It's legal for CEOs
| to insider trade._
|
| Wealth is probably also helpful if you want to get away with
| rape or murder.
|
| Also, insider trading is bad.
| rideontime wrote:
| Gee, if people will get away with crimes anyway, why bother
| making anything illegal?
| ajross wrote:
| The accused was using their access within Coinbase to front run
| trades and announcements. That's not "middle class" trading
| under any reasonable definition and I can't imagine why you
| think it should be legal.
|
| How would any market function if the market makers are allowed
| to cheat with impunity.
| idiotsecant wrote:
| No, insider trading is clearly not 'a middle class person
| profiting in a way the ruling class don't like' - it's using
| information you have that most of the market doesn't in order
| to take money from them. The answer to wealthy people being
| able to get away with insider trading easier is not to throw
| the baby out with the bathwater and say that all insider
| trading is fine, it's to actually enforce insider trading laws.
| It's not some impossible task to do a better job enforcing
| those rules, it's just not popular with the people who
| (shocking) make money by exploiting this kind of information
| asymmetry. If we decided to make it a policy priority tomorrow,
| the problem would be much, much smaller.
| c7DJTLrn wrote:
| Insider trading laws don't mean anything. Person X can send
| encrypted messages to person Y who lives half way around the
| world to make a trade and they will be near impossible to
| discover unless person X is surveilled. Even then, person Y
| can just get away with it.
| mtoner23 wrote:
| Just because you can get away with a crime doesnt mean its
| not a real crime
| c7DJTLrn wrote:
| That's not my point. Insider trading is so _easy_ that
| anybody with privileged information can do it and even
| get away with it if they 're cautious. Instead of working
| tirelessly just to catch the sloppy 1% we should reform
| the market so that nobody has an advantage because of
| what they know.
| [deleted]
| jonhohle wrote:
| Re: congress, I think there should be a public fund that
| mirrors the trades of reps and senators and a platform that
| enforces their trades happen concurrently with public funds.
| The Pelosi's seem to have impeccable market timing that, I'm
| sure coincidentally, seems to correlate with policy votes.
|
| Certainly, elected officials working for our best interest
| would want to share their success with their constituents.
| pavlov wrote:
| The essence of the cryptocurrency narrative is laid bare here.
| Sure, maybe it looks like it's scamming desperate people out of
| their life savings, but ignore that, really it's just a middle
| class person profiting in a way that the ruling class doesn't
| like! Why do you hate the middle class getting rich? You must
| be in league with the globalist bankers.
| woodruffw wrote:
| A variation of this comment is made on HN whenever insider
| trading comes up, leaving me no recourse but to post the same
| response every time: insider trading is criminalized _not least
| because_ it is corrosive to public trust in financial
| institutions.
|
| Your examples (Congress, CEOs) _demonstrate_ this: main street
| investors have overwhelmingly lost faith in those institutions
| over the last two generations. The solution isn 't to race to
| the bottom; it's to make insider trading _universally_ illegal.
| mtoner23 wrote:
| This is a psycho take. We banned insider trading. Allowing
| insider trading would obviously help the ruling class. CEOs
| cannot insider trade. And obviously we should just ban congress
| to trade stocks.
| c7DJTLrn wrote:
| >CEOs cannot insider trade
|
| Well, they do. All the time. And they get away with it.
| xsmasher wrote:
| Most CEOs can not sell stock without announcing it well
| ahead of time, or during scheduled periods.
|
| What form does this insider trading take?
| mikeyouse wrote:
| One perk of a public blockchain is that crimes like these are
| more transparent! A Twitter user 'discovered' the fraud a few
| months ago:
|
| https://twitter.com/cobie/status/1513874972552355846
| Ergo19 wrote:
| As it turns out, a distributed immutable ledger is quite useful
| for investigators.
| cuteboy19 wrote:
| The person was lazy. There are many ways to obfuscate this even
| when the ledger is public
| hamter wrote:
| yeah but it was private and presumably a pretty limited
| number of people knew about it at the time which narrows down
| the number of potential candidates pretty considerably.
| dvt wrote:
| There are so many other ways to do this that are infinitely
| harder to track. Suppose token X is going to hockey stick.
| You can short a derivative that shorts X. You can long a
| derivative that longs X. You can leverage a lending
| protocol that contains X. Etc.
|
| "Buying X when X will go up" has got the be the most
| unsophisticated way possible one can leverage insider
| information. Not to mention a basically guaranteed way to
| get caught.
| hackernewds wrote:
| How would one do this?
|
| you're right in that, the illusion of transparency actually
| gives the sophisticated players cover.
| wmf wrote:
| If he used different wallets to buy different coins then
| the correlation might not have been noticed. Buying coins
| right before they're listed on Coinbase is still suspicious
| but it would have been less suspicious at least.
| pcwalton wrote:
| The indictment describes the numerous ways in which the
| perpetrator managed to obfuscate the insider trading. It
| didn't stop the USG from finding him and prosecuting him.
| tempsy wrote:
| just because it's available doesn't mean it's trivial to figure
| out. it does actually take effort to find something like this.
| capableweb wrote:
| That specific thing is kind of trivial to check though.
| Download the full chain, check which addresses has exactly
| the same list of tokens as the list was published by
| Coinbase, check which ones received the tokens shortly before
| it was announced.
| tempsy wrote:
| yes true but you still have to be intentional about what it
| is you're searching for.
| caiomassan wrote:
| with some effort the search can be automated.
| yayitswei wrote:
| Moral judgements aside, how is what Ishan Wahi did legally
| different than Nancy Pelosi purchasing millions worth of Nvidia
| stock ahead of the CHIPS Act vote? Is it a private/public sector
| difference?
| danso wrote:
| Thought this was a repost of the DOJ charges last month against
| the former product manager who knew about NFT listings [0], but
| that was OpenSea. I guess this Coinbase incident technically
| counts as "First Ever Cryptocurrency Insider Trading" scheme,
| even though it's common to conflate "crypto" with NFTs and coins
| these days
|
| [0] "Former OpenSea employee charged in digital asset insider
| trading scheme " https://news.ycombinator.com/item?id=31584937
| jrochkind1 wrote:
| I am shocked, shocked to find that gambling is going on in here!
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