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Comment by romellem | Hacker News Reader

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

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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)

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

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.)

> the definition of insider trading is kind of, “whatever the SEC enforces”

Insider trading is a crime. The SEC cannot bring criminal complaints. Every insider trader who has gone to jail was prosecuted by the DoJ.

According to SEC: https://www.investor.gov/introduction-investing/investing-ba...

FBI: https://www.fbi.gov/news/stories/insider-trading

Only talk about securities. It seems to me as if it would depend a lot on if the digital asset(s) in question count as securities or not.

Nope, insider trading is a type of fraud, they’ll be charged with wire fraud and the question on securities will never arise

The already have been as the DOJ press release states. Also the SEC is filing a civil case, as they do

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.

The DoJ isn't prosecuting them for `Insider Trading`. It's prosecuting them for Wire Fraud against Coinbase. Wire Fraud doesn't require there be a security involved at all.

Thank you, can you elaborate a bit? Insider trading involves trading of a company's securities, correct? Because crypto isn't a security in the SEC's eyes, this doesn't apply?

How are they getting them on wire fraud charges? The texts back and forth describing the scheme?

The way I understand it, there is a lot of controversy over whether or not crypto is a security. However, Insider Trading is a type of Fraud, and proving fraud does not require it to be insider trading and does not require crypto to be a security. What makes it Wire Fraud is just that it took place "over the wire", ie on the internet.

I think the key to understanding how this is fraud is the fact that they acted on privileged Material Information to the disadvantage of their employer, not the exact nature of how they profited off it. Essentially, they stole company secrets.

I thought Hoeg's video on it was good:

https://www.youtube.com/watch?v=EafL0w48IAg

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...

No. Suspects are often arrested on a subset of the criminal charges with which they will ultimately be indicted. Even in more serious crimes like mass shootings, prosecutors will press charges on only a few of the homicide counts at first. This is common practice for prosecutors.

Well, when they indict on the remaining 18 then we can update our models. Until then, the SEC is only alleging that 7 were securities.

That's a horrible prior.

This isn't about the SEC at all. Arresting on a subset of eventual charges is something that nearly all prosecutors do, and for a large set of very good strategic reasons.

I think you'd be hard-pressed to find many examples of high-profile cases where the original arrest was based on all possible charges.

Yeah, I'm not arguing they don't do that. This is one of those cases where arguing the negative without clearly stating your argument makes things easy but not particularly useful.

What argument are you presenting instead? Because he was charged for 7 instances of security fraud we should assume that all 25 are securities fraud? Regardless of whether the SEC eventually charges all 25, they've clearly decided to differentiate them all on some metric (otherwise, they would've charged them all at the same time).

True, but your model should already reflect the fact that this is a not an uncommon pattern.

Is there a list of all 25 somewhere? This could provide some illumination on what SEC does and does not consider a security.

Or maybe the SEC considers all of them securities but thought that they had the strongest case for these seven and didn't want the distraction of arguing about the other 18. But yeah, would be interesting to see the list.

If SEC considers any of them securities, it's very strange for them to go after a single guy at Coinbase and not the entire company, since they've just declared them an illegal securities exchange.

(As opposed to an illegal commodities exchange for bitcoin.)

Yeah and Coinbase just fired back: https://blog.coinbase.com/coinbase-does-not-list-securities-...

This will be the central issue of the case. It'll be interesting! Will Coinbase step in to defend this guy who they were going to fire, just to prove that they don't list securities?

I think maybe it's only strange if you assume the SEC has unlimited money and time. Grandparent comment says it better, but they're likely focusing on cases they think are pretty clear-cut.

I'm interested in cases like Rari where there was a decentralized governance mechanism but it was dominated by a "core team", that feels like it encompasses a larger slice of the space than I would have expected. Many of the others are deeply unsurprising though, they are US corporations, took VC investments, have active managerial teams which are all employees of that corp, and advertise themselves as working to increase token value.

Yeah, good luck convincing a judge about that

"Well technically" works sometimes. Only sometimes. And people who aren't familiar with SEC rules are not really qualified to say if it's fair game or not.

That's a fantastic insight - thanks for the link.

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.

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.

lol there’s no departure checks at the border, you can just drive across.

You can walk into Mexico basically without a single check of any kind.

FBI is too busy planting evidence to assign an agent to every person on HN.

> Eschew flamebait. Avoid unrelated controversies and generic tangents.

From the Hacker News Guidelines [0]. Please take these comments elsewhere.

0: https://news.ycombinator.com/newsguidelines.html

This sounds like something a cop would say.

India has an extradition treaty with the U.S. https://www.state.gov/wp-content/uploads/2019/02/12873-India... sooner or later he'd be back in an orange jump suit

Extradition is 10 order of magnitude harder, even for the US legal system. Plus, he'll have enough time to figure out another country where extraditing him is just not worth it anymore.

india is a huge country. very easy to get lost, blend in

I’m not so sure that’s the case now under the new Aadhaar system.

Not really. As a local, I can get by without any aadhaar. He had $1.5m in bank, he could have started his parallel government, or probably for $15m but the fact is that even if you're doing everything by law you don't need aadhaar in India.

..and with Australia, but one alleged criminal has been gaming the system after fleeing Australia to India for 14 years now:

https://duckduckgo.com/?q=%22puneet+puneet%22

Question is how hard the Indian government would be willing to work to arrest and extradite him.

Depends what the US offers in exchange?

What would they offer to make it worthwhile? It's not like the US is holding Indian nationals in detainment whom the Indian Government would be willing to scour the country to find someone to exchange for release.

Perhaps they would for a violent criminal or terrorist, but it certainly seems unlikely for a relatively small-time white collar criminal. The fraud totaled $1.5M, this guy isn't exactly Bernie Madoff. Surely the US would not expect the Indian Government to spend multiple millions in operational and resource costs to locate, capture, and extradite a nonviolent criminal who made $1.5M illegally.

Could be lots of things more or less public and unrelated. One more diplomatic visa, help locating/finding/extraditing an India national from U.S., a little help for a contract... Countries have a lot of "diplomatic" incentives they can use for situations like that. And sometimes it is totally worth spending 10x the fraud amount if what you want to do is an example which could well be the case here.

In the Twitter thread, it sounds like these guys may be connected to frauds worth tens of millions.

https://en.wikipedia.org/wiki/Passenger_name_record

This exists for boats too, and is generally also broadcast between countries before international arrivals for scheduled services.

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.

Could well be he was tipped off about the purpose of the meeting...

Most fully remote companies won't demand an in person meeting unless it's something of a disciplinary nature anyway. Merely a message saying "Your employer requires you to appear at X time at Y place" would be a red flag for many.

The message would say "is it easier to discuss this next to a whiteboard?" If it were friendly...

Well it's never happened to me, but they say if you get a meeting invite from human resources at any point, it's clear what's going to happen.

This was a meeting with a security team though?

it 100% was set up

Or if you do, make sure you leave the same day and not the next day.

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.

If I've learned anything from reading espionage fiction novels -- you book a flight for tomorrow and leave on the bus tonight.

Much better to drive across the border and then book a flight with a non-US airline.

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.

Isn't the whole point of crypto that you don't need to get your cash out of a bank account that the government can monitor and potentially lockdown?

But he is likely not a crypto believer. He already sold all of them, at least the tokens he was trading with insider information.

Crypto is good for recouping his funds once he's out of country and settled. Not super liquid when making last minute on-the-fly purchases though (at least not with the current level of adoption)

ideologically, yes, but I don't see any airlines that take payment in crypto for one-way rush last minute tickets to india

> turnstile into Tijuana

q1: Surely walking from one country to another needs paperwork of some kind?

q2: And even then, don't they check passport for port of entry? Like how and when did you get to mexico if you want to leave it?

Mexico doesn't check anything. Years ago I walked into Mexico. 2019 I rode a motorcycle into Mexico, so you could argue they had my plates, but they didn't know who was under the helmet, and definitely didn't know which 5' passenger I had as a passenger also wearing a helmet, even though you could argue she's possibly the size of a child even (she was just a small 23 year old)

1. Nope. Technically you are supposed to show id if you want to go further into Mexico than about 40km? The army has checkpoints.

2. Nope to enter mexico by foot in certain border tourist cities, of course USA cbp/ice requires full id for anyone coming back.

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.

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.

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

> someone committing financial crimes in the crypto industry might have more scope for planning their offramp

One would think.

> the last thing I would do is book a flight for tomorrow.

Maybe, that was his 'last thing'

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.

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.

> 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.

They lived in Houston, probably drove to Mexico.

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?

There's a traffic signal with a green or red light. If you get a green light, you keep going. They don't even ask for your documents. If you get a red light, you have to stop and go through the full process.

They do not.

Yeah, maybe book a flight for 1 hour from now and hope they don't find out in time...

that wouldn't have given him time to pack 3 suitcases.

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

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.

To my discredit, I was one of those people. I stand corrected.

Interesting that it sounds like that tweeter thinks that Coinbase wants the SEC to go after this case. In reality Coinbase is upset that the SEC went after this (but fine that the DOJ went after it):

https://blog.coinbase.com/coinbase-does-not-list-securities-...

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.

Cobie used to co-ordinate pump and dumps?

Every cryptocurrency personality leveraged their network effects to make millions. Go look at the founder of LTC tweeting moon moon while dumping LTC.

Sorry I'm not familiar, I've been following this coinbase story for a while, but didn't know that Twitter user was in on it. Do you have any link or info to share?

...whilst also working for a UK Bank irl.

I wonder if the Tweet Account was fed info from someone in the accused's circle who didn't get their cut.

Coinbase shady stuff around listings has been an open secret in crypto, everyone knows about it. Dates all the way back to LTC listing and probably earlier.

How did they manage to intercept him at the airport? Are there lists for suspected criminals?

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.

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.

So you should really drive to central america, I guess?

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.

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.

I'm pretty sure the 30% of the Brazilians who don't have bank account, don't have these issues. Your friend picked to live in Brazil, but also didn't want to sacrifice his western conveniences (ie: A bank account, card, being connected to the "system"). He got the worst of both worlds.

Just telling the story because I thought it fitted into the conversation, I don't really agree with his decision or would call him a friend haha.

Yes, Brazil is extremely bureaucratic and almost everything is linked to the CPF (Cadastro de Pessoa Física) tax registration number. It's necessary to open a bank account, get a phone, book a flight, rent a car, etc.

As they say, Brazil is not for amateurs.

No. Purchase a plane ticket first. Then leave by car.

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.

> 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.)

I've crossed three land borders to Canada in the past few years and none had an outgoing checkpoint.

I've driven through the Tijuana border into mexico about 10x and haven't been stopped once. Easy to do. Hard part is getting back in to the US.

it was too late for him.

How can you stop someone driving to mexico? They can drive to a border city and walk across without any passport control.

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.

His mistake was to make those trades.

Couldn’t he have sent a canary to the boarding gate?

Fun times ahead for the canary being indicted for helping a criminal play around with law enforcement.

Given the security checks are done by facial recognition, this seems like action-movie level stuff.

Moral of the story: buy lotsa tickets when you try to skip town

What if they know whether you check in? It would be hard to check in at all the airports.

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