The blockchain industry has been facing heat for the past couple of years due to the confusion in law enforcement in the industry. Due to no real regulatory frameworks set in place for the sector, the growth and trust around cryptocurrencies too have been low.
However, in a recent incident, an ex-employee of the popular cryptocurrency exchange Coinbase was arrested for insider trading. While there have been previous incidents of such nature in the industry, this is one of the first incidents to gain massive popularity due to the reputation of the company.
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About Coinbase
Founded by Brian Armstrong and Fred Ehrsam, Coinbase is one of the biggest cryptocurrency exchanges in the world. It was launched in 2012 with an ambitious mission to ‘put cryptocurrency in everyone’s wallet’. Coinbase also boasts of being the first ever cryptocurrency company to be listed on NASDAQ.
The company functions on a remote structure without any physical headquarters and yet employs more than 3700 employees. It has secured a position as one of the safest platforms to buy and store cryptocurrency since its launch. Initially funded by Y Combinator, the platform is now backed by some of the biggest investors in the space.
The First Cryptocurrency Insider Trading Case in the U.S
Insider trading, in simple words, means leaking company information to others, specifically to friends or family, for personal gains. While there have been several insider trading cases previously in the finance industry, this is an apparent first for the blockchain sector.
The main accused was a former product manager at Coinbase named Ishan Wahi. According to the US Securities and Exchange Commission, Ishan, who oversaw the listing of new cryptocurrencies on the exchange, had leaked information regarding the same to his brother Nikhil Wahi and his friend Sameer Ramani.
The trio had allegedly stocked up on the soon-to-be listed tokens only to sell them later at a higher price, as a listing generally brings a price increase. According to officials, they had used this method to generate over $1.1 million illicitly by purchasing over 25 tokens. Ishan Wahi was nabbed from the airport on 16th May, disrupting his plan to fly back to India, and his hometown.
Nikhil Wahi was also arrested followingly from Seattle, while Sameer Ramani is assumed to be at large. SEC has stated that Coinbase shall not face any charges. The trio on the other hand have been charged with wire fraud conspiracy and wire fraud.
US Attorney Damian Williams took the opportunity to address the concerns around the lack of rules and regulations for the blockchain industry. “Today’s charges are also a reminder that Web3 is not a law-free zone. Our message with these charges is clear: a fraud is a fraud, should it occur on the blockchain or Wall Street,” he commented on the case.
The CEO and founder of Coinbase stated that it would cooperate with authorities for any legal proceedings. Coinbase had fired and reported the three to the Department of Justice as soon as they received findings regarding the illegal activities.
He also mentioned that the company will constantly be in check and shall report any illegal activities which could end up in potential prison time.
With the markets bleeding following the massive correction last year, the cryptocurrency market has suffered major losses. There have been an array of negative headlines that forced several popular cryptocurrencies to fall even more. From massive hacks to severe insolvency issues, the blockchain industry has had a difficult year so far.
Investors are scared and confused not only due to the volatility of these assets but also around several obstacles that stand in the way of the industry’s growth. One such major issue is the absence of strict legal frameworks and regulations.
Since the industry rose in popularity only a couple of years ago, a much-needed regulatory framework is yet to be introduced.
Major financial institutions all over the world have been working towards achieving this goal since the lack of it gives rise to several crimes and frauds.
This has also acted as a reason for several legislations to ban or disapprove of the blockchain industry. With several loopholes exploited by hackers and major fraud incidents within the space, investors too have been worried about security.
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