Department of Justice Announces Charges in First Ever Cryptocurrency Insider Trading Tipping Scheme

Jul 28, 2022

On July 21, 2022, the Department of Justice announced charges against a former Coinbase employee in connection with the first ever cryptocurrency insider trading tipping scheme. According to the DOJ, the employee, his brother, and a friend were part of “a scheme to commit insider trading in cryptocurrency assets by using confidential Coinbase information about which crypto assets were scheduled to be listed on Coinbase’s exchanges.” The Indictment alleges that the three defendants “generated more than a million dollars in illegal trading profits through their participation in a scheme to engage in insider trading.”

These charges follow a recent federal crackdown on digital assets and their regulation. For example, last month,  the DOJ charged a former Ozone Networks, Inc., or OpenSea, employee with wire fraud and money laundering “in connection with a scheme to commit insider trading in Non-Fungible Tokens, or ‘NFTs,’ by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain.”

Given the Biden administration’s focus on regulating digital assets, it’s not surprising to see these charges brought forth. However, it should be noted that both cases also include traditional white collar offenses: conspiracy, money laundering, and wire fraud. As U.S. Attorney Damian Williams explained, “[F]raud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.” In other words, while the types of securities and assets at issue have changed as a result of new technologies, the government continues to prioritize the prosecution of consumer-related crime.