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Former New Jersey Corrections Officer Charged with Crypto Fraud Scheme Targeting Law Enforcement Personnel

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KaratCoin Cryptocurrency

John DeSalvo also charged with fraud in separate investment scheme

Washington D.C. — The Securities and Exchange Commission has charged former New Jersey State Correctional Police Officer John A. DeSalvo with fraudulently raising funds through the unregistered offering of the Blazar Token, a crypto asset security he created but that collapsed in May 2022. The SEC also charged DeSalvo with misappropriating investor funds, much of which he sent to his personal crypto asset wallets and used to pay for a bathroom renovation.

According to the SEC’s complaint, from the Blazar Token’s launch in November 2021 to its eventual collapse, DeSalvo raised at least $620,000 from approximately 220 investors. As the complaint alleges, DeSalvo claimed that the Blazar Token would replace existing state pension systems and falsely told investors that Blazar Token was registered with the SEC; that he had arranged for Blazar Token to be purchased by automatic payroll deduction; and that investors were guaranteed to receive extraordinary returns. Ultimately, DeSalvo misappropriated and misused investor funds. According to the complaint, DeSalvo targeted law enforcement and first responders with his fraudulent schemes.

Additionally, the SEC’s complaint alleges that, in an earlier fraud scheme, beginning in late January 2021, DeSalvo solicited investors, primarily through social media, to participate in an investment venture where he was to invest their funds in stocks, options, and crypto asset securities. The complaint alleges that, within weeks of depositing the $95,000 he raised from 17 investors into his brokerage account, DeSalvo lost about $17,000 of those funds in speculative investments, misappropriated the remaining $78,000, and told investors that the group’s securities had lost all value due to poor market conditions.

“We allege that DeSalvo orchestrated several fraudulent investment schemes that targeted law enforcement personnel and promised astronomical returns, including one involving a crypto asset security that would somehow replace traditional state pension systems. Rather than producing any returns or revolutionary technology, he instead misappropriated and misused investor money,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “What’s particularly offensive about this case is that DeSalvo used his status as a former corrections officer to gain the trust of fellow law enforcement personnel, a number of whom invested their savings with him. I am proud that the SEC is able to deliver some measure of justice to those brave first responders who DeSalvo victimized by holding him accountable for his appalling conduct.”

“Our complaint alleges a brazen affinity fraud that preyed on retail investors’ trust and sense of community,” said David Hirsch, Chief of the Crypto Assets and Cyber Unit in the SEC’s Division of Enforcement. “Too often in crypto, we see promoters perpetrate familiar frauds in shiny new wrappers by making claims that are difficult for investors to independently verify. Registering the offer and sale of securities enables critical oversight and improves disclosures to investors, and we will continue to pursue those who fail to abide by the securities laws’ registration requirements.”

The complaint, filed in the U.S. District Court for the District of New Jersey, charges DeSalvo with violating the antifraud and offering registration provisions of the securities laws. It seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against DeSalvo.

The SEC’s investigation was conducted by Brian Higgins and Brian Thomas of the Philadelphia Regional Office and David Snyder of the Crypto Assets and Cyber Unit. It was supervised by Assunta Vivolo, Scott A. Thompson, Nicholas P. Grippo, Jorge G. Tenreiro, and David Hirsch. The SEC’s litigation will be handled by Christopher R. Kelly and supervised by Gregory R. Bockin.

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Press release by SEC.

SEC obtains emergency order against Utah-based company’s crypto asset fraud scheme

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"Crypto Bitcoin stock pic Chest Piggy Bank" by Crypto360 is marked with CC BY 2.0.

Washington D.C. — The Securities and Exchange Commission has announced that it obtained a temporary asset freeze, restraining order, and other emergency relief against Digital Licensing Inc., a Draper, Utah based entity doing business as “DEBT Box,” as well as the company’s four principals, Jason Anderson, his brother Jacob Anderson, Schad Brannon, and Roydon Nelson, and 13 other defendants in connection with a fraudulent scheme to sell crypto asset securities to hundreds of U.S. investors that raised approximately $50 million and unspecified amounts of Bitcoin and Ether.

The SEC’s complaint, unsealed yesterday in the U.S. District Court for the District of Utah, charges the defendants in an ongoing scheme that began in March 2021 to sell unregistered securities they call “node licenses.” In hundreds of online videos and social media posts, as well as at investor events, the defendants told investors that the node licenses would generate various crypto asset tokens through crypto mining activity and that revenue-generating businesses in a variety of sectors would drive the value of the various tokens DEBT Box mined, resulting in exorbitant gains for investors. In reality, as alleged, the node licenses were a sham intended to obscure the fact that the total supply of each token was created by DEBT Box instantaneously using code on a blockchain.

“We allege that DEBT Box and its principals lied to investors about virtually every material aspect of their unregistered offering of securities, including by falsely stating that they were engaged in crypto asset mining,” said Tracy S. Combs, Director of the SEC’s Salt Lake Regional Office. “We filed this emergency action to protect the victims of the defendants’ unlawful actions and stop further harm.”

The SEC’s complaint further alleges that DEBT Box and its principals —along with defendants James Franklin, Western Oil Exploration Company Inc., and Ryan Bowen—lied to DEBT Box investors about the revenues of the businesses purportedly driving the value of the tokens.

In total, 18 defendants, including those mentioned above, have been charged with engaging in unregistered securities offerings. DEBT Box, Jason Anderson, Jacob Anderson, Brannon, Nelson, Franklin, Western Oil, and Bowen were also charged with violations of the antifraud provisions of the federal securities laws. Jason Anderson, Jacob Anderson, Brannon, Nelson, Bowen, Mark Schuler, Benjamin Daniels, Joseph Martinez, Travis Flaherty, Brendon Stangis, Matthew Fritzsche, B & B Investment Group, LLC, and iX Global, LLC were charged with acting as unregistered brokers.

The complaint seeks permanent injunctive relief, the return of alleged ill-gotten gains, and civil penalties.  The Honorable Judge Robert J. Shelby, U.S. District Judge for the District of Utah, entered an order on July 28, 2023, imposing a temporary restraining order, asset freeze, and other relief. Judge Shelby also entered an order appointing Josias N. Dewey of the law firm Holland & Knight LLP as a temporary receiver over DEBT Box to, amongst other things, marshal assets for the benefit of investors.  Investors who believe they were affected by the DEBT Box offering may visit the receiver’s website at www.debtboxreceiver.com or call (305) 349-2134.

The SEC’s continuing investigation is being conducted by Joseph Watkins, Laurie Abbott, and Mitchell Davidson of the Salt Lake Regional Office and Karaz Zaki of SEC Headquarters. The litigation will be led by Casey Fronk and Michael Welsh. The matter is being supervised by Ms. Combs.

Investors can learn more about the risks of investing in crypto asset securities and unregistered offerings by reading SEC investor education bulletins such as Exercise Caution with Crypto Asset Securities and 10 Red Flags That An Unregistered Offering May Be A Scam.

Press release by SEC.

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RSE Markets Inc. Charged for Operating an Unregistered Securities Exchange

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Washington D.C. — The Securities and Exchange Commission has announced settled charges against RSE Markets Inc. for operating as an unregistered exchange by maintaining and providing a marketplace and facilities that brought together purchasers and sellers of securities, specifically equity interests in “collectible assets” such as valuable cars and watches.

The SEC’s order finds that, between July 1, 2018, and November 20, 2021, RSE operated the Rally Platform, consisting of the RallyRd.com website, the Rally App, and trading functionality, for retail investors based in the United States to purchase and sell securities. Secondary market trading for these securities occurred exclusively on the Rally Platform within trading windows provided by RSE. RSE used an algorithm to match orders based on price and time priority, calculated a final clearing price at which matched orders would execute, and required matched buyers and sellers to provide confirmation of their willingness to transact at the final clearing price.  According to the SEC’s order, the trading interests that RSE accepted were firm orders, as demonstrated by representative data showing that almost all matched trading interests were confirmed and executed. Despite these facts, and RSE marketing the Rally Platform as a stock exchange, the company neither registered the Rally Platform as a national securities exchange nor operated it pursuant to an exemption from such registration.

“RSE operated and marketed its platform as an exchange but failed to comply with the SEC’s registration provisions,” said Tejal D. Shah, Associate Regional Director of the SEC’s New York Regional Office. “When a firm operates an unregistered trading platform, as RSE did, it deprives investors of important protections under the securities laws, including requirements to file disclosures with the Commission and create and maintain certain books and records.”

Without admitting or denying the SEC’s findings, RSE agreed to cease and desist from committing or causing any violations and any future violations of Section 5 of the Securities Exchange Act of 1934 and to pay a $350,000 civil penalty.

The SEC’s investigation was conducted by Rebecca Reilly, John Lehmann, and Sandeep Satwalekar, all of the New York Regional Office. The case was supervised by Ms. Shah.

Press Release by SEC.

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PetSmart to Pay $1.46 Million For Charging Customers Prices Higher than those Advertised

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"Profits Key" by Got Credit is marked with CC BY 2.0.

Los Angeles (CA) – Los Angeles County District Attorney George Gascón announced today that PetSmart LLC has been ordered to pay $1.46 million to settle a lawsuit that alleges the company overcharged customers for items it listed in advertisements.

“Charging customers prices higher than what was advertised is misleading and unfair,” District Attorney Gascón said. “Customers have the right to expect that the prices they see advertised will be honored. It’s important for companies to adhere to advertising regulations and ensure transparency in their pricing practices.”

The complaint was filed in Santa Cruz County on behalf of the district attorney’s offices in Alameda, Contra Costa, Los Angeles, Marin, San Diego, Santa Cruz and Ventura counties. It alleges that PetSmart unlawfully charged customers prices higher than PetSmart’s lowest advertised price for items.

The company, which admits no wrongdoing as part of the settlement, will pay $1.25 million in penalties, $100,000 in restitution to support future enforcement of consumer protection laws and $110,000 in investigative costs.

PetSmart is prohibited from engaging in false or misleading advertising and charging an amount greater than the lowest price posted for an item.  Additionally, the settlement requires PetSmart to implement additional audit and price accuracy procedures in its California stores for a three-year period to ensure compliance with pricing accuracy requirements, including notifying customers of their right to be charged the lowest currently advertised price for any item offered for sale.

Press release by the LA County DA’s Office.

Featured image: by Got Credit is marked with CC BY 2.0.

Former Pfizer Statistician Charged with Insider Trading

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Employee and friend traded ahead of Pfizer’s “game-changer” announcement on the success of its Paxlovid trial

Washington D.C. — The Securities and Exchange Commission has announced insider trading charges against Amit Dagar, a former Pfizer Inc. employee, and his close friend and business partner, Atul Bhiwapurkar, for trading in advance of the company’s November 5, 2021, announcement that a randomized, double-blind study of its COVID-19 antiviral treatment, Paxlovid, was successful. Following that announcement in which Pfizer’s CEO referred to the news as a “game-changer” in the global efforts to “halt the devastation” of the pandemic, the company’s stock price increased by nearly 11 percent, the largest single-day price move in the stock since 2009.

According to the SEC’s complaint, Dagar was a senior statistical program lead for the Paxlovid drug trial, which began in July 2021 as part of the company’s efforts to address the global health pandemic. On the day before the Paxlovid announcement, the complaint alleges, Dagar learned material, nonpublic information about the success of the trial. Specifically, the SEC alleges that Dagar’s supervisor informed him via chat that “we got the outcome,” there was a “lot of work lined up,” and that there would be a “press release tomorrow,” to which Dagar responded with “oh really” and “kind of exciting.” Several hours after that exchange, Dagar allegedly purchased short term, out-of-the-money Pfizer call options, including options that expired the very next day, and then tipped Bhiwapurkar, who also purchased similar call options in Pfizer. The complaint alleges that Dagar’s and Bhiwapurkar’s trading generated approximately $214,395 and $60,300 respectively in illicit profits, which amounted to one-day investment returns of 2,458 percent and 791 percent.

The case originated from the SEC’s Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns.

“As alleged in our complaint, Amit Dagar misused his access to confidential clinical trial results to enrich himself and his friend, Atul Bhiwapurkar,” said Joseph Sansone, Chief of the Market Abuse Unit. “Dagar and Bhiwapurkar allegedly leveraged this information by trading out-of-the-money call options to generate massive one-day returns. Thanks to our surveillance, the defendants must now face the consequences of their greed.”

The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, charges Dagar and Bhiwapurkar with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 thereunder and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Dagar and Bhiwapurkar.

The SEC’s investigation, which is ongoing, is being conducted by Market Abuse Unit staff member Colby Steele, with the assistance of Patrick McCluskey of the Market Abuse Unit’s Analysis and Detection Center, and is being supervised by Paul Kim and Mr. Sansone. The SEC’s litigation will be led by Charlie Divine and Mr. Steele under the supervision of James Connor. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the FBI.

Press Release by SEC.

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SEC Charges Investment Fund Founder William K. Ichioka with $25 Million Offering Fraud

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Featured image: “Invest card” by ota_photos is marked with CC BY-SA 2.0.

Washington D.C., June 22, 2023 — The Securities and Exchange Commission today charged William K. Ichioka, of New York, New York, with fraudulently raising $25 million from individual investors primarily in California and Oregon by making false claims about his investing success and promising large anticipated returns but instead using investor funds for gambling and to enrich himself. Ichioka has agreed to resolve the charges against him.

According to the SEC’s complaint, filed in the United States District Court for the Northern District of California, from at least June 2019 to October 2021, Ichioka solicited investments for his unregistered investment fund, Ichioka Ventures, by claiming he was an accomplished investor, promising oversized returns, and guaranteeing investors’ principal. In reality though, as the complaint alleges, Ichioka was unable to pay investors the promised returns and used money from new investors to repay other investors. Also, as alleged in the complaint, Ichioka falsified a bank statement and other documents to create an appearance of success. Finally, according to the complaint, Ichioka also misappropriated millions of investors’ funds for personal use, such as on luxury watches, cars, gambling, and a penthouse apartment.

“As we allege in our complaint, Ichioka lured investors by falsely stating that he was a self-made multimillionaire investor able to generate significant investment returns, but the real story was that Ichioka stole investor funds to enrich himself,” said Monique C. Winkler, Director of the SEC’s San Francisco Regional Office. “This case highlights the SEC’s commitment to holding bad actors accountable and protecting the integrity of our markets.”

The SEC’s complaint charges Ichioka with violating the antifraud provisions of the federal securities laws. Ichioka has agreed to the entry of a partial final judgment, subject to court approval, imposing requested permanent and conduct-based injunctions as well as an officer and director bar, and reserving issues of disgorgement, prejudgment interest, and a civil penalty for further determination by the court.

In parallel actions, the U.S. Attorney’s Office for the Northern District of California (USAO) and Commodity Futures Trading Commission (CFTC) today also announced charges against Ichioka.

The SEC’s investigation was conducted by Erin E. Wilk of the Enforcement Division’s Crypto Assets and Cyber Unit and supervised by Jason H. Lee and Ms. Winkler of the San Francisco Regional Office. The SEC’s litigation will be led by Ms. Wilk and John Han. The SEC appreciates the assistance of the USAO, CFTC, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation.

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Press release by the SEC.

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Man Convicted of $54M Bribery and Kickback Scheme Involving Fraudulent Prescriptions

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"Prescription Prices Ver3" by ccPixs.com is marked with CC BY 2.0.

A federal jury convicted a Florida man for his role in a $54 million bribery and kickback scheme involving TRICARE, a federal program that provides health insurance benefits to active duty and retired service members and their families.

According to court documents and evidence presented at trial, David Byron Copeland, 55, of Tallahassee, was a part-owner and senior sales manager at Florida Pharmacy Solutions (FPS), a Florida-based pharmacy that specialized in compounded prescription drugs. Copeland, along with his accomplices, engaged in a practice known as “test billing” to develop the most expensive combination of compounded drugs to maximize reimbursement from TRICARE. Copeland and his accomplices targeted physicians who treated TRICARE beneficiaries and paid bribes and kickbacks to physicians and salespeople to encourage the referral of prescriptions to FPS. The bribes included lavish hunting trips and expensive dinners. In addition, Copeland and his accomplices used “blanket letters of authorization” that allowed FPS to modify the prescription components to make them more profitable.

Copeland and his sales representatives were paid millions of dollars in kickbacks based on a percentage of the amount that TRICARE reimbursed for their prescriptions, which provided an incentive to seek prescriptions for the most expensive compounded drugs possible, including pain and scar creams. Copeland facilitated the kickbacks through companies he set up to receive and funnel the payments. From late 2012 through mid-2015, FPS billed TRICARE over $54 million for its compounded pharmaceuticals.

The jury convicted Copeland of two counts of soliciting and receiving illegal health care kickbacks and three counts of offering and paying illegal health care kickbacks. The jury acquitted Copeland of conspiracy to defraud the United States and to pay and receive illegal health care kickbacks. His sentencing is scheduled for Sept. 14. He faces a maximum penalty of 10 years in prison for each kickback count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Two other men, James Wesley Moss, the former chief executive officer of FPS, and Michael Gordon, a former FPS sales representative, previously pleaded guilty for their roles in the scheme and are awaiting sentencing.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division; U.S. Attorney Roger Handberg for the Middle District of Florida; Special Agent in Charge Darrin K. Jones of the U.S. Department of Defense Office of Inspector General (DOD-OIG), Defense Criminal Investigative Service, Southeast Field Office; Special Agent in Charge Omar Perez of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), Miami Regional Office; Special Agent in Charge David Spilker of the U.S. Department of Veterans Affairs Office of Inspector General (VA-OIG), Southeast Field Office; and Special Agent in Charge David Walker of the FBI Tampa Field Office made the announcement.

The DOD-OIG, HHS-OIG, VA-OIG, and FBI investigated the case.

Trial Attorneys Devon Helfmeyer, Katie Rookard, and Clayton Solomon of the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, comprised of 15 strike forces operating in 25 federal districts, has charged more than 5,000 defendants who collectively have billed the Medicare program for more than $24 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with the Office of the Inspector General for the Department of Health and Human Services, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.

Press release by DOJ.

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SEC Shuts Down WeedGenics $60 Million Cannabis Offering Fraud

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"Fraud Key" by Got Credit is marked with CC BY 2.0.

Washington D.C. — The Securities and Exchange Commission obtained an emergency order to halt an alleged ongoing offering fraud and Ponzi-like scheme by Integrated National Resources Inc. (INR), which does business as WeedGenics, and its owners, Rolf Max Hirschmann and Patrick Earl Williams, who have raised more than $60 million from investors to expand their cannabis operations, but have instead used the majority of funds to make $16.2 million in Ponzi-like payments and to enrich themselves.

According to the complaint, since at least June 2019, Hirschmann and Williams have promised investors they would use raised funds to expand WeedGenics facilities, which they guaranteed would produce up to 36 percent returns, but in reality Hirschmann and Williams never owned or operated any facilities—it was all a sham. The complaint alleges that when Hirschmann and Williams received investors’ funds, they transferred the money through multiple accounts to enrich others and for personal use such as entertainment, jewelry, luxury cars, and residential real estate. The complaint further alleges that in an attempt to avoid detection, Hirschmann, acting as the face of the company, used the fake name Max Bergmann the entire time he communicated with investors, while Williams, as Vice President of the company, worked behind the scenes while spending investor funds on his more public career as a rap musician known as “BigRigBaby.”

“Rolf Hirschmann and Patrick Williams allegedly had no real company, no product, and no business, yet despite this, they promised investors everything and then delivered nothing,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office. “This action demonstrates that, despite the defendants’ extensive efforts to avoid detection, the SEC has the ability to uncover fraud to protect investors.”

The court granted the SEC emergency relief against INR, Hirschmann, Williams, and several relief defendants, including a temporary restraining order, an order freezing their assets, and appointment of a temporary receiver over INR and the entity relief defendants. A hearing is scheduled for June 2, 2023 to consider whether to issue a preliminary injunction and appoint a permanent receiver.

The SEC’s complaint charges the defendants with violating the antifraud provisions of the securities laws and seeks permanent injunctions, conduct-based injunctions, disgorgement with prejudgment interest, civil penalties, and officer and director bars. The SEC also seeks disgorgement with prejudgment interest from the named relief defendants.

The SEC’s Office of Investor Education and Advocacy encourages investors to review the Investor Alert on Frauds Targeting Main Street Investors, and to access the investor protection resources at Investor.gov.

The SEC’s investigation was conducted by Christopher A. Nowlin and Stephen Bucci and supervised by Finola H. Manvelian of the SEC’s Los Angeles Regional Office. The litigation will be led by Daniel S. Lim and supervised by Gary Y. Leung.

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Press release by the SEC.

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Disgraced businesswoman Hadari Oshri announces Gaya Ventures networking event in Malibu

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AN IMPORTANT NOTE: On June 22, 2021, Hadari Oshri –Marc Lubaszka’s business partner– filed a civil harassment restraining order (CHRO) against Investor News reporter Aitana Vargas to stop the publication of her investigative series “A Special Report: The Harrowing Impunity of White-Collar crime,” and any subsequent installments or future media coverage. On August 3, 2021, Vargas filed an anti-SLAPP motion to strike Oshri’s CHRO petition. In a hearing held on September 13, 2021, Los Angeles Superior Court Judge Doreen Boxer granted Vargas’s anti-SLAPP motion and denied Oshri’s civil harassment petition for failure to sustain the applicable burden of proof. Oshri will now have to pay Vargas’s attorney’s fees for filing a frivolous case. The Israeli entrepreneur also declined to go on a recorded interview or provide statements via email.

Los Angeles (CA) – Serial entrepreneur Hadari Oshri continues her quest to conquer the fitness and well-being industry through her latest company, Gaya Ventures, whose team includes convicted criminal Orlando Birbragher, according to the company site.

In multiple public posts –including her Twitter account, her company site and public forum Luma–, the disgraced businesswoman is throwing a networking event in a beachfront Malibu house to connect with like-minded individuals.

“We are thrilled to invite you to a distinguished networking event hosted by Gaya Ventures. As a leader in the private equity industry, we are actively seeking investment opportunities in the rapidly growing health and wellness sector,” says her public post.

The text goes on to announce that “This exclusive event will provide an exceptional platform for networking and collaboration among key players in the health and wellness industry. It will serve as an opportunity for us to connect, exchange ideas, and explore potential synergies that can propel both our organizations to new heights.”

Hadari Oshri lost First Amendment Rights case in 2021

To her credit, Oshri’s legacy already reached new heights in the Fall of 2021, after losing an embarrassing First Amendment Rights case against award-winning reporter Aitana Vargas. Oshri and her attorney, John Tamborelli, demanded and pressured the journalist to stop working on an investigative series that went on to win a top LA Press Club award in 2022.

*Read here the court’s anti-SLAPP ruling in favor of the reporter.

Tamborelli’s legal threats were met with a letter by the National Writers Union (NWU) demanding that he stop all and any potential intimidation towards the journalist.

*Read here the NWU letter.

Oshri’s failed SLAPP attempt to silence her business links to conman Marc Lubaszka and her long list of prior business failures will cost her thousands of dollar in legal fees for filing a frivolous case, as mandated by California’s powerful anti-SLAPP statute.

Oshri’s “exclusive” networking event is not open to everyone though. Interested parties must be considering or wanting to sell “their operations” and “be on a minimum $500,000 EBITDA.”

*This story will be updated as more information becomes available.

**For news tips and story ideas, please contact investigative reporter Aitana Vargas at aitana_investigations@protonmail.com.

***After this reporter survived in 2021 an anti–SLAPP motion against Ms. Oshri, as a matter of policy, this outlet no longer reaches out to Ms. Oshri and her then-attorney, John Tamborelli, for comment. But we remain fully committed to hearing and sharing their opinion should they decide to reach out to us by email. Email: aitana_investigations@protonmail.com

Former Coinbase Manager and His Brother Agree to Settle Insider Trading Charges Relating to Crypto Asset Securities

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bitcoin back 2019

Washington D.C. — The Securities and Exchange Commission today announced that former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi, agreed to settle charges that they engaged in insider trading through a scheme to trade ahead of multiple announcements regarding at least nine crypto asset securities that would be made available for trading on the Coinbase platform. Ishan and Nikhil Wahi each agreed to be permanently enjoined from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 and to pay disgorgement of ill-gotten gains, plus prejudgment interest. As is often the case when a criminal court has already ordered defendants to forfeit their ill-gotten gains, the disgorgement and prejudgment interest in the SEC’s case would be deemed satisfied by the orders of forfeiture of the Wahi brothers’ assets in the criminal action, if approved by the court, and the SEC determined not to seek civil penalties in light of the Wahi brothers’ prison sentences.

The SEC’s complaint, filed on July 21, 2022, in the U.S. District Court for the Western District of Washington, alleged that, while employed at Coinbase, Ishan Wahi helped to coordinate the platform’s public listing announcements that included what crypto assets would be made available for trading. According to the complaint, Coinbase treated such information as confidential and warned its employees not to trade on the basis of, or tip others with, that information. However, from at least June 2021 to April 2022, in breach of his duties, Ishan repeatedly tipped the timing and content of upcoming listing announcements to his brother, Nikhil Wahi, and his friend, Sameer Ramani. Ahead of those announcements, which usually resulted in an increase in the assets’ prices, 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. The Wahi brothers agreed, as part of the settlement, not to deny the SEC’s allegations.

“While the technologies at issue in this case may be new, the conduct is not. We allege that Ishan and Nikhil Wahi, respectively, tipped and traded securities based on material nonpublic information, and that’s insider trading, pure and simple,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “The federal securities laws do not exempt crypto asset securities from the prohibition against insider trading, nor does the SEC. I am grateful to the SEC staff for successfully working to resolve this matter.”

Subject to court approval, Ishan and Nikhil Wahi consented to the entry of final judgments that permanently enjoin them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In the criminal action, Ishan and Nikhil Wahi pled guilty to conspiracy to commit wire fraud. Ishan Wahi was sentenced to 24 months in prison and ordered to forfeit 10.97 ether and 9,440 Tether, and Nikhil was sentenced to 10 months in prison and ordered to forfeit $892,500.

The SEC’s investigation was conducted by Michael Brennan, Jennie B. Krasner, and Gregory Padgett, with assistance from Patrick McCluskey, Sejal Bhakta, and Donald Battle. The case was supervised by Paul Kim, Joseph Sansone, and Carolyn M. Welshhans. The litigation is led by Daniel Maher and Peter Lallas and supervised by Olivia Choe. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the FBI.

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Press release published by the SEC.

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