Coinbase to pay $6.5m for false reporting and wash trading
The Commodity Futures Trading Commission (CFTC) has ordered Coinbase to pay $6.5 million for engaging in false, misleading or inaccurate reporting and for wash trading. The cryptocurrency exchange is one of the world's leading crypto trading platforms and is preparing to go public over the next few months.
Coinbase settles with the CFTC
Cryptocurrency exchange Coinbase has settled its case with the CFTC and will pay the regulatory agency $6.5 million for several misconducts a few years ago. According to the consent order published by the regulatory agency yesterday, the cryptocurrency exchange self-traded a small amount of crypto between 2015 and 2018 via two of its automated trading programs.Furthermore, the CFTC is also punishing the exchange after a now-former employee allegedly wash traded a few litecoins (LTC) during that period. CFTC stated that "The order requires Coinbase to pay a civil monetary penalty of $6.5 million and to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations, as charged."
Acting Director of Enforcement Vincent McGonagle pointed out that reporting false, misleading, or inaccurate transaction information belittles the integrity of digital asset pricing. "This enforcement action sends the message that the Commission will act to safeguard the integrity and transparency of such information," he added.
The two Coinbase automated programs, Hedger and Replicator, generated orders that sometimes matched with one another. While the GDAX Trading Rules revealed that Coinbase was trading on GDAX, it didn't disclose that the cryptocurrency exchange was running more than one trading platform and using multiple accounts.
On the second charge, the CFTC revealed that over a six-week period, a former Coinbase employee intentionally leveraged a manipulative or deceptive device to place buy and sell orders in the BTC/LTC trading pair on GDAX. Thus, matching each other as wash trades. As a result, creating a misleading appearance of liquidity and trading interest in LTC.
Coinbase is yet to issue any public comment since the CFTC's decision.
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