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Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

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Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#151

Post by pvarangot »

tqi wrote: post #139

A few hypotheticals I'm curious about: 1. If Coinbase itself had purchased a bunch of coins before listing on its own exchange, would that be illegal? 2. If the employee had purchased coins that were correlated with the ones that were listed, but not the specific ones that were listed, would that be illegal?

With 1. I think it depends on intent. For example when Tesla purchased BTC before announcing they were taking payments to have some liquidity on it for financial reasons or whatever, then it's ok. If you can prove they are front-running the market because for example right after announcing they are listing a coin they dump what they got before listing it then yeah maybe that's insider trading.

The thing is if they take enough measures to prevent their employees from doing it. It's hard considering they can do it on another exchange, but at least on their own exchange my understanding is they should prevent their employees from trading if they have privileged information.

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#152

Post by adrr »

pjc50 wrote: post #90
vishnugupta wrote: post #56

It talks volumes about the internal controls at CB that it took a tweet to expose this. Given the speed with which they grew last two years I expect their financial and security processes to be next to nothing. This is just tip of an iceberg. Insiders would have made tens of millions over last two years of bull run, if not more. This dude just got greedy and unlucky to get caught just as the crypto bubble began burst…

A lot of people suspect there's ""official"" insider trading at the exchanges; there's no reason for the exchange not to front-run orders or fake the order book if they think they can get away with it. Or trade against heavily leveraged positions to liquidate them. Or prop-trade with the customers' money.

It’s legal for the company to do it. Not legal for individuals. Coinbase could have bought assets ahead of time and done the same thing legally.

There was a case where a person had access to the credit card transaction data[1] and used that data to figure out sales prior to earning calls. That same data is available to hedgefunds willing to purchase it from Bloomberg. They call legally get a companies sales data prior to earnings and trade off that information.

1. https://www.reuters.com/article/us-sec-capitalone-insidertra...

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#154

Post by potamic »

H8crilA wrote: post #133

Why are they being prosecuted? Those are not securities, or are they? "Wire fraud" implies that they defrauded someone by lying to their own advantage over a digital channel. Insider trading is generally legal for non-securities. EDIT: I am not implying that they shouldn't, on a moral level. They should! I am asking about legal technicalities, and about the state of law around those issues.

It's in the release,

> U.S. Attorney Damian Williams said: “Today’s charges are a further reminder that Web3 is not a law-free zone. Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them.”

> FBI Assistant Director Michael J. Driscoll said: “Although the allegations in this case relate to transactions made in a crypto exchange - rather than a more traditional financial market – they still constitute insider trading. As alleged, the defendants made illegal trades in at least 25 different crypto assets and realized ill-gotten gains totaling approximately $1.5 million. Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets – both ‘old’ and ‘new.’”

Why do you say insider trading is legal for non-securities?

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#155

Post by sudosysgen »

spaceman_2020 wrote: post #131
giarc wrote: post #102

Earlier quoted context omitted.

What could they do though? Ask all employees to provide their personal wallet addresses then monitor that? Seems unlikely to happen.

Opsec in crypto funds is terrible Most serious hedge funds won’t even allow you to bring your cellphone inside the trading pit.

Serious hedge funds won't allow you to trade or having any positions that may remotely have a conflict of interest.

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#156

Post by rmbyrro »

duxup wrote: post #125
rmbyrro wrote: post #109

Earlier quoted context omitted.

About a fraudster that was caught by a random person who could look at his fraud publicly, under the light of the sun. The part after "fraudster..." is what sets apart the blockchain and traditional financial networks, when it comes to fraud. If you commit fraud in the traditional financial system, only the financial institution has a chance to find it suspicious and tip the government agency responsible to investiga…

>is what sets apart the blockchain and traditional financial networks, when it comes to fraud Are you telling me that fraudsters get caught on the blockchain more than other places?

> Are you telling me that fraudsters get caught on the blockchain more than other places?

I'm sorry, but I did not say "more" and "other places" in my comment.

What I said is what I wrote.

My point is: blockchain is not anonymous. The hate bandwagon that says fraudsters have a safe heaven for doing whatever they want without a slight chance of being caught is just fantasy land...

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#157

Post by AlexandrB »

toolz wrote: post #105
fny wrote: post #31

Earlier quoted context omitted.

Yes it is... which is why the hammer needs to come down and hard.

This is a value judgement. If you find crypto to be unfair, there's a very simple solution that doesn't require bringing in guys with guns to deal out punishment. You can simply just not participate. In an ideal world we could get rid of insider trading, but selectively punishing people just makes the problem worse and with so much of congress dominating the market I think it's quite clear the punishment is selective…

> This is a value judgement. If you find crypto to be unfair, there's a very simple solution that doesn't require bringing in guys with guns to deal out punishment. You can simply just not participate.

Ok. And I assume the welfare bills of crypto scam victims will be paid directly by crypto companies? What about hospital bills from attempted suicides? If you want crypto to be its own special island, fine, but you have to accept the costs of dealing with all the externalities.

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#158

Post by [deleted] »

adrr wrote: post #152
pjc50 wrote: post #90

Earlier quoted context omitted.

A lot of people suspect there's ""official"" insider trading at the exchanges; there's no reason for the exchange not to front-run orders or fake the order book if they think they can get away with it. Or trade against heavily leveraged positions to liquidate them. Or prop-trade with the customers' money.

It’s legal for the company to do it. Not legal for individuals. Coinbase could have bought assets ahead of time and done the same thing legally. There was a case where a person had access to the credit card transaction data[1] and used that data to figure out sales prior to earning calls. That same data is available to hedgefunds willing to purchase it from Bloomberg. They call legally get a companies sales data prio…

[deleted]

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#159

Post by H8crilA »

potamic wrote: post #154
H8crilA wrote: post #133

Why are they being prosecuted? Those are not securities, or are they? "Wire fraud" implies that they defrauded someone by lying to their own advantage over a digital channel. Insider trading is generally legal for non-securities. EDIT: I am not implying that they shouldn't, on a moral level. They should! I am asking about legal technicalities, and about the state of law around those issues.

It's in the release, > U.S. Attorney Damian Williams said: “Today’s charges are a further reminder that Web3 is not a law-free zone. Just last month, I announced the first ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall St…

> Why do you say insider trading is legal for non-securities?

What, exactly, prohibits you from doing that? Certainly not the Securities Act of 1933 or any SEC rule.

Overall maybe this is a complicated way of officially calling them securities and cleaning this mess on a higher level. At least that's what the FBI implies. However, it is not up to the FBI to decide what is a security, but rather up to the courts of law. This will be interesting.

Re: Former Coinbase PM charged in cryptocurrency insider trading tipping scheme

#160

Post by H8crilA »

pirate787 wrote: post #149
MR4D wrote: post #144

Earlier quoted context omitted.

I have this same question. Crypto has not been defined as an asset category yet (and the SEC has not declared it to be a “security” so far). FTA - “. . . wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading in cryptocurrency assets. . .” I’m presuming that it’s the fraud they are going after, and the “insider trading” aspect is verbal sugar. I can’t imagine that insider trading w…

From another angle, he defrauded Coinbase, through violating the terms of employment as part of the listing team.

Right! That may be the answer.
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