By Jody Godoy
NEW YORK (Reuters) -Ishan Wahi, a former Coinbase (NASDAQ:COIN) Global Inc product manager, was sentenced on Tuesday to two years in prison in what U.S. prosecutors have called the first insider trading case involving cryptocurrency.
U.S. District Judge Loretta Preska sentenced Ishan Wahi, 32, in Manhattan federal court after the defendant pleaded guiltyin February to two counts of conspiracy to commit wire fraud.
The scheme involved a "massive abuse" of Coinbase's trust, Preska said during the sentencing hearing, adding that attempts to cover it up showed that Wahi and his co-defendents knew their actions were wrong.
It is one of several high-profile cryptocurrency-related cases brought by U.S. prosecutors in New York, including one against FTX founder Sam Bankman-Fried, who has pleaded not guilty.
Prosecutors have said Wahi shared confidential information with his brother Nikhil and their friend Sameer Ramani about which digital assets would be listed on Coinbase, one of the world's largest cryptocurrency exchanges.
The tipoff allowed the three men to make $1.5 million by trading 55 digital assets ahead of the listing announcements between June 2021 and April 2022, according to prosecutors.
Nikhil Wahi pleaded guilty in September to a wire fraud conspiracy charge, and in January was sentenced to 10 months in prison. Ramani remains at large.
At Tuesday's hearing, Ishan Wahi expressed remorse for his actions and their effect on his friends and family, several of whom were in court.
"I made a huge mistake that will follow me for the rest of my life," Wahi said.
Assistant U.S. Attorney Noah Solowiejczyk said during the hearing that Wahi's conduct was "not a one-off mistake" but a stream of tips over 10 months.
Wahi had asked in court papers for a sentence no longer than his brother's, citing other insider trading cases that resulted in little or no prison time.
Prosecutors had called for Ishan Wahi to spend more than three years in prison to deter other cryptocurrency insiders from misusing corporate information.
Prosecutors can charge fraud in instances in which deception was used to seek financial gain, regardless of the kind of asset involved. This gives the U.S. Justice Department more latitude to go after crypto-related wrongdoing than its civil counterpart, the U.S. Securities and Exchange Commission, which is limited to policing the securities markets.
The SEC has argued in lawsuits, including one it filed against Ishan and Nikhil Wahi over their trades, that many digital assets are securities. Ishan Wahi and the SEC have reached an agreement in principle to settle the claims, while Nikhil Wahi and the SEC are also in settlement talks, court papers showed.
Coinbase has said it does not list any securities.