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The DOJ announced this week that a former product manager at Coinbase has been sentenced to 2 years in federal prison for sharing confidential company info about token listings with his brother & friend so that they could trade in those tokens. Although the charges were unique because they were the first-ever insider trading case involving crypto and gave us an early sign that the SEC was going to take a harder stance on tokens being securities, this case also has ramifications for companies and employees in any industry – because it shows the harsh consequences that can result from insider trading.

A 2-year stint in federal prison is nothing to sneeze at. This Bloomberg article further highlights that prosecutors are out for blood, and details the parade of horribles that can accompany an insider trading conviction, in addition to jail time:

“This error in judgment has cost him everything: his career, his health, his relationships, his family’s name, and has seriously jeopardized the future of his relationship with his long-term girlfriend,” Wahi’s lawyer, David Miller, wrote in a sentencing memo. “Ishan has squandered years of hard study in school, tireless years of professional development, and forfeited his ability to work in what was a promising and lucrative career.”

Prosecutors sought a sentence of 37 to 46 months behind bars, the same amount called for by federal guidelines, saying that giving him just 10 months would send the wrong message.

Earlier this year, I blogged about a guilty plea & 10-month prison sentence for one of the tippees in this case. Last week, a former exec at a different company was convicted in an insider trading case involving NFTs.

With many companies taking a fresh look at insider trading policies and training programs right now, this sentence can serve as a reminder to insiders about why it’s important to follow the policy. See our “Insider Trading Policies Handbook” for an updated model policy and lots of practical guidance.

– Liz Dunshee