Day: January 8, 2023

Insider Trading Via Coinbase Gets Nikhil Wahi 10 Month Sentence

 

A U.S. District Judge sentenced Nikhil Wahi to 10 months in prison on Tuesday, bringing one part of a historic cryptocurrency criminal case to a close. Wahi, the brother of a former Coinbase product manager, was charged with conspiracy to commit wire fraud last July in what prosecutors called the “first ever cryptocurrency insider trading case.”

“I made a huge mistake, a terrible mistake,” Wahi said Tuesday.

Nikhil pleaded guilty to that charge in September, admitting that his brother, Ishan Wahi, used his position at one of the largest crypto exchanges to pass along confidential information on asset listings. Ishan would tell Nikhil when a coin was about to be listed on Coinbase. And in response, Nikhil bought up shares of the cryptocurrencies just before they showed up on the popular exchange via an anonymous wallet. When the coin values inevitably went up after listing, legitimated by their presence on Coinbase, Nikhil would sell the shares off for a profit, according to a statement from the New York’s Southern District Attorney.

“Today’s sentence makes clear that the cryptocurrency markets are not lawless,” said prosecuting U.S. Attorney, Damian Williams.

In total, Nikhil reportedly made $892,500 off of his brother’s illicit advice, trading ahead of 40 different Coinbase announcements, according to a report from Reuters. He has been ordered to pay back that entire sum as part of his sentencing—on top of the 10 months of incarceration.

“It’s something that I will have to live with forever,” Nikhil Wahi told the sentencing judge, Loretta Preska, according to a report from Bloomberg. He is subject to deportation to India following the completion of his prison term. Nikhil’s defense attorney claimed that her client was motivated by a desire to support his parents in India, and repay them for his U.S. college education, reported Bloomberg.

Ishan and a third party, a friend of Nikhil’s named Sameer Ramani, are also facing criminal charges over the insider trading scheme. Ishan pled not guilty to his charge, and was released on bail in July. His case is pending. Ramani, on the other hand, is not in U.S. custody and is considered at large.

“There are real consequences to illegal insider trading, wherever and whenever it occurs,” Williams, the prosecutor, said. Yet one conviction and sentencing does not a robust system of regulation make. A crypto insider trading scandal even reached the hallowed halls of Congress earlier this year. The House Ethics Committee fined North Carolina Rep. Madison Cawthorn $15,000 for his apparent illicit advanced knowledge of NASCAR’s failed Let’s Go Brandon Coin sponsorship, and his promotion of the memecoin. Cawthorn did not face criminal charges. And, as always, scams and fraud abound on the blockchain. The fraud trial of FTX’s CEO Sam Bankman-Fried is scheduled for October.

The fact that the Wahi brothers were caught mostly came down to a luck. Twitter user @cobie noted a sketchy Ethereum purchase and posted about it. “Found an ETH address that bough hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published,” @cobie tweeted on April 12, according a report from The Verge. A day later, Coinbase’s chief security exec responded to say the exchange was investigating. Other tweets have pointed out similar anomalies, though those tweets have not resulted in anyone’s arrest.

Over 77% Of Bitcoin Millionaires Wiped Out As Crypto Winter Rages

 

Bitcoin’s price has taken a hit since it hit its all-time high back in 2021, and as a result, the number of bitcoin millionaires has dwindled dramatically since then. These addresses holding more than $1 million in BTC peaked in November 2021 and have been on a steady decline since then.

Bitcoin Millionaires Suffer Losses

Back in November 2021, when the bitcoin bull market was in full bloom, the number of BTC millionaires had crossed 100,000 wallets. At its highest point, there were 108,886 wallets with more than $1 million worth of BTC in their balances, but according to data from BitInfoCharts, this number has dropped below 25,000.

At a current count of 24,533 millionaire wallets, more than 77% of bitcoin investors with the millionaire status have been wiped out in a little over a year. The majority of the losses came in the first half of 2022 and by June 2022, there were only a little over 26,000 BTC wallets with more than $1 million in their balances. 

Wallets holding at least $10 million worth of BTC also took a hit during this time. It was sitting at only 3,852 at the time of this writing. However, smaller investors have been on the rise. According to a report from Glassnode, the number of BTC addresses holding higher than 0.1 and 1 BTC reached new all-time highs on Tuesday, January 10.

This marked accumulation from these smaller addresses shows that investors are not deterred by the decline in prices. But rather, are taking advantage of the low prices to increase their holdings.

 

BTC price holding steady above $17,000 | Source: BTCUSD on TradingView.com

BTC Profitability Declines As Well

The drop in the number of bitcoin millionaires is also in line with the decline in the profitability of the digital asset. Bitcoin started the year 2022 with only about a quarter of its investor seeing losses, but by January 2023, it has dropped drastically, and now only 51% of BTC investors are in profit.


 

Its large holder concentration has also dropped during this time. Only 10% of wallets are now classified as large holders, indicating a redistribution of BTC from whales to smaller holders. It also points to more decentralization with supply being more adequately distributed for market participants.

As for bitcoin’s price, it is still trading well below its all-time high price despite its recent recovery above $17,000. Data from Messari shows that the price of the digital asset is currently down more than 74% from its November 2021 high.

BTC is changing hands at $17,320 at the time of this writing. It is up 3.7% in the last week with a 24-hour trading volume of $16.2 billion.

 

 

Russia to begin work on CBDC settlement system in Q1 as sanctions endure: Report

 

Russia’s central bank is reportedly set to begin developing a cross-border settlement system using its Central Bank Digital Currency (CBDC) amid ongoing sanctions in response to its invasion of Ukraine.

The plans to move forward with Russia’s digital ruble are expected to come in the first quarter of 2023 and will see Russia’s central bank study two possible cross-border settlement models, according to a Jan. 9 report from local media outlet Kommersant.

The first proposed model sees various countries entering into separate bilateral agreements with Russia to integrate their CBDC systems.

Each agreement would be made to ensure the conversion and transfer of assets between the countries are in accordance with the rules of the agreements.

The second, more complicated model proposes a single hub-like platform for Russia to interact with other countries, sharing common protocols and standards to facilitate payments between the connected countries.

Roman Prokhorov, the head of the board of the Financial Innovations Association (AFI) opined that the first model was more simple to implement but less promising for bilateral interactions between countries.

The other option was more “advanced” and he considered an initial two-way system may be implemented with China as the most likely partner for its “technological and political readiness.”

Earlier reports in Sep. 2022 claimed Russia was planning to use its digital ruble for settlements with China by sometime in 2023.

Still, others believe Russia’s CBDC play won’t be hamstrung by technology, but rather by politics.

Vice President of the Association of Banks of Russia, Alexey Voylukov, said introducing a digital ruble won’t change or improve Russia’s global political situation and trials for the CBDC platform can only be undertaken with Russian government-friendly countries who are technologically ready.

Related: Crypto regulation world: How laws for digital assets changed in 2022

Previously, the Bank of Russia said it was looking to roll out its digital ruble by 2024, with all banks and credit institutions connected to the CBDC’s platform.

Russia has faced mounting financial and trade sanctions since its escalation of the Russo-Ukrainian war when it launched a full-scale invasion of Ukraine in late-February 2022.

It’s since tried to enact policies, or pondered ways to skirt the sanctions such as the central bank considering the use of cryptocurrencies in the country “only to support foreign trade.”

The Bank of Russia and the Ministry of Finance came to an agreement in Sep. 2022 on a rule allowing Russians to send cross-border payments using crypto.

Supreme Court clears way for WhatsApp case against NSO Group, opening spyware firm to more lawsuits

 

The Supreme Court on Monday denied a petition from NSO Group, the Israeli spyware maker, to dismiss a lawsuit alleging the firm exploited the WhatsApp platform in 2019 to spy on 1,400 users.

The decision upholds a previous California federal court ruling that rejected NSO Group’s arguments that it qualified for foreign sovereign immunity because it had been acting on behalf of a foreign government to investigate terrorist activity at the time it deployed the software.

NSO Group filed its petition with the Supreme Court in April after a federal judge in California rejected an appeal in the case brought by Meta, WhatsApp’s parent company.

“Meta has repeatedly impeded law enforcement’s ability to lawfully investigate criminals use of WhatsApp to commit serious crimes and acts of terror,” an NSO spokesperson told CyberScoop in an email. “We are confident that the court will determine that the use of Pegasus by its customers was legal.”

The Supreme Court previously called on the Biden administration to weigh in on the case and in November the Justice Department filed an amicus brief asking the court to deny the petition. The administration in 2021 added NSO Group and fellow Israeli spyware company Candiru to its entity list of companies that pose a national security risk.

The high court’s ruling comes amid growing concern from Washington about reining in the spyware industry. President Biden is expected to sign an executive order curtailing the use of spyware by federal agencies sometime this year and members of Congress have also proposed legislative solutions.

“We’re grateful to see the Supreme Court rejected NSO’s baseless petition,” Carl Woog, a spokesperson for WhatsApp, wrote in a statement to CyberScoop. “NSO’s spyware has enabled cyberattacks targeting human rights activists, journalists, and government officials. We firmly believe that their operations violate U.S. law and they must be held to account for their unlawful operations.” 

The court’s decision could help bolster the standing of other lawsuits against the surveillance firm. The Knight Institute filed a lawsuit in U.S. federal court against NSO Group in December on behalf of members of the Salvadoran news outlet El Faro. The lawsuit alleges that the NSO Group violated U.S. hacking laws by deploying spyware against the journalists.

“We’re pleased that the Supreme Court rejected NSO Group’s petition. Today’s decision clears the path for lawsuits brought by the tech companies, as well as for suits brought by journalists and human rights advocates who have been victims of spyware attacks,” Carrie DeCell, senior staff attorney at the Knight First Amendment Institute at Columbia University, wrote in a statement. “The use of spyware to surveil and intimidate journalists poses one of the most urgent threats to press freedom and democracy today.”

Apple is also suing NSO Group in an effort to permanently ban the company from using any of its products, services or software.