Sunday, March 21, 2021

CRIMINAL CRYPTO CAPITALI$M

COINBASE SETTLES $6.5M WITH CFTC FOR FALSE REPORTING AND WASH TRADING

MARCH 20, 2021, RICK STEVES

Reporting firms such as Crypto Facilities Ltd., which publishes the CME Bitcoin Real Time Index, and CoinMarketCap OpCo, LLC, used the misleading trading data from Coinbase for price discovery and potentially resulted in a perceived volume and level of liquidity of digital assets, including Bitcoin, that was false, misleading, or inaccurate.



The Commodity Futures Trading Commission has settled charges against Coinbase Inc. for “reckless false, misleading, or inaccurate reporting” as well as “wash trading by a former employee on Coinbase’s GDAX platform”.

The digital asset exchange operator will pay a civil monetary penalty of $6.5 million in order to settle the charges.

Vincent McGonagle, Acting Director of Enforcement of the CFTC, commented: “Reporting false, misleading, or inaccurate transaction information undermines 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.”

The CFTC alleged that Coinbase delivered false, misleading, or inaccurate reports concerning transactions in digital assets on the GDAX trading platform between January 2015 and September 2018.

Coinbase automated trading programs, Hedger and Replicator, generated orders that at times matched with one another. The GDAX Trading Rules failed to disclose that Coinbase was operating more than one trading program and trading through multiple accounts.

As Hedger and Replicator matched orders with one another in certain trading pairs and then provided the information for these transactions on its website and to reporting services, Coinbase misled the market.

Reporting firms such as Crypto Facilities Ltd., which publishes the CME Bitcoin Real Time Index, and CoinMarketCap OpCo, LLC, used the misleading trading data from Coinbase for price discovery and potentially resulted in a perceived volume and level of liquidity of digital assets, including Bitcoin, that was false, misleading, or inaccurate.


The CFTC order also charged Coinbase for being “vicariously liable as a principal” for a former employee’s conduct. Over a six-week period—August through September 2016, the former employee used a manipulative or deceptive device by intentionally placing buy and sell orders in the Litecoin/Bitcoin trading pair on GDAX that matched each other as wash trades.

This practice, also known as “wash trading”, misleads the market in regard to liquidity and trading interest in Litecoin.

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