Nikhil Wahi, a 27-year-old crypto trader whose brother worked for Coinbase, has agreed to pay $469,525.50 to the publicly traded cryptocurrency exchange for his role in an insider-trading scheme.
The court filing, which was signed April 6, was made public Monday. In September, Wahi agreed to a plea deal with the Department of Justice.
Lawyers for Nikhil did not immediately respond to a request for comment when contacted by Fortune. A spokesperson for the Justice Department also did not respond, and Coinbase declined to comment.
“There are real consequences to illegal insider trading, wherever and whenever it occurs,” U.S. attorney Damien Williams said in a statement after Nikhil was sentenced to 10 months in prison in January.
Nikhil’s restitution payment is the latest development in the fallout of an insider-trading scheme that has potentially industry-wide ramifications. It is also the first time, the Justice Department says, inside traders who exploited cryptocurrency markets have been prosecuted successfully.
In a separate civil case, the Securities and Exchange Commission has sued Nikhil, his brother, Ishan, and Sameer Ramani, another alleged member of the scheme, for violating the antifraud provisions of the securities laws.
From approximately June 2021 to April 2022, Ishan, the Coinbase manager, conspired with Nikhil and Ramani—neither were Coinbase employees—to buy up crypto tokens before they were listed on the exchange, according to the Justice Department’s initial indictment.
Because of his position at Coinbase, Ishan knew when the exchange planned to list new cryptocurrencies. On multiple occasions, he let his brother and Ramani know the assets’ launch dates, and they purchased them beforehand. When Coinbase announced these assets’ listings, their prices inevitably went up, given the exchange’s prominence in the industry, and the three conspirators sold them for a profit.
Ishan separately agreed to a plea deal with the Justice Department in February. His sentencing is scheduled for May 10. Ramani, as last reported by the DOJ, remains at large.
Coinbase, a victim in the criminal cases, has surprisingly come to the defense of the Wahis and Ramani. Along with other blockchain boosters like the venture capital firm Paradigm, it has filed a “friend of the court” brief. They argue that the SEC has no jurisdiction to file a lawsuit, as the tokens Nikhil Wahi and Ramani bought before they were listed on Coinbase fail the Howey Test, a legal doctrine that evaluates whether an asset is a security.
The age-old debate of whether cryptocurrencies are securities has potentially existential implications for U.S.-based crypto firms, who, if the SEC’s argument prevails, would be subject to increased regulatory scrutiny and a bevy of potential fines.
