Crypto Has a PR Problem
On February 12, 1987, Rudy Giuliani, then US attorney for the Southern District of New York, had three Wall Street executives arrested for insider trading.
Two were led from their Manhattan offices in handcuffs, with FBI agents dramatically pushing their way through media that had been promised a front-page worthy photo-op. The third was arrested at home.
The charges against all three were subsequently dropped for a complete lack of evidence.
Giuliani probably didn't care much: He got his perp walks, his press conference and his newspaper headlines.
He chose his targets carefully, first making a name for himself by going after New York's Italian mafia and then turning his sights on New York's only less popular institution: Wall Street.
That way, if his charges turned out to be vacuous, no one would sympathize with the falsely accused, as was the case with all three of the Wall Street executives.
They must like to make their arrests in threes in the Southern District, because it was the same New York Attorney's office that announced July 21 the indictment of three insider traders in the campaign against a new popular villain: crypto.
The Case of the Missing Information
Will these insider accusations stick better than they did in 1987? Or is this a virtual perp walk and a quick PR win for a prosecutor with Giuliani-sized political ambitions?
I'm not a lawyer, so I can't judge on the first question.
But I am a newsletter writer, so I can spot B.S. (especially financial B.S.) from a mile away.
I've spotted quite a lot of it in the district attorney's statement — which makes me think crypto is being elevated to Wall Street levels of cartoon villainy.
That's a problem, as it makes the industry an easy target for politically ambitious prosecutors, regulators, and, well, politicians.
How much of a problem? Let's parse the statement and find out:
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.
U.S. Attorney Damian Williams really wants you to know this was a FIRST EVER. As if he's landed on the moon or something.
Sorry, Damian, but arresting three nerds for trading some cryptos no one's ever heard of does not make you Neil Armstrong.
On the other hand, Rudy Giuliani is about as famous as the first ever man on the moon, so what do I know, maybe it does.
Mr. Williams praised the investigative work of the FBI.
HAHAHAHA.
They read a tweet by Cobie which Coinbase then investigated. Great sleuthing!
You're a regular bunch of Sherlock Holmeses.
Next time I can't find a tweet I know I've seen, I'll be sure to call the FBI for help.
After getting tips from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets
Anonymous wallets? Are there any other kinds?
Remind me not to use byrongilliam.eth next time I launder some ill-gotten newsletter gains.
ISHAN WAHI and NIKHIL WAHI were arrested this morning in Seattle, Washington, and will be presented today in the United States District Court for the Western District of Washington. SAMEER RAMANI was also charged today and remains at large.
So dramatic! I can't wait for the movie version: Curses! They're still out there front running people!!
Those names do admittedly look scary in all caps. I'll sleep easy tonight knowing they can't front-run me from prison.
Although, they've been fired from Coinbase, so I'm not sure what they'd be front-running. Maybe the line at Starbucks?
What a ridiculous waste of law enforcement resources.
Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.
There's more than one blockchain, but OK, fine.
U.S. Attorney Damian Williams said: "Today's charges are a further reminder that Web3 is not a law-free zone.
There's nothing Web3 about Coinbase.
Saying Coinbase is Web3 because you can buy cryptos there is like saying Sears was Web2 because you could buy computers there.
Yes, the trades in question were conducted on decentralized exchanges, but that's not where the alleged crime took place. The information was from a centralized exchange and it's the use of that information that is being prosecuted here.
They haven't been charged with insider trading. They've been charged with wire fraud "in connection with a scheme to commit insider trading," and the only victim in that crime is Coinbase.
So, let Coinbase police it!
Which is what they were doing: They have policies. The policies were broken. The employees were fired.
Except that now the protocols are victims, too, because they've been declared securities. UGH.
FBI Assistant Director Michael J. Driscoll said: "The defendants made illegal trades in at least … 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.'"
Please tell me this is not what the Assistant Director of the FBI is spending his time on.
$1.5 million dollars? We're not in Rudy Giuliani's 1987 heyday anymore.
It makes them sound like Dr. Evil just out of deep freeze: One MILLION dollars!
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