Coinbase has made a deal with the Commodity Futures Trading Commission, according to an announcement on Friday, and will pay a $ 6.5 million fine.
The agreement focused on two areas: information on commercial activity on Coinbase’s GDAX trading platform and allegations of wash trading by a Coinbase employee over a six-week period in 2016.
The U.S. regulator said that “between January 2015 and September 2018, Coinbase recklessly delivered false, misleading or inaccurate reports on transactions in digital assets, including Bitcoin, on the GDAX electronic trading platform it operated.”
The problem was linked to two characteristics of its institutionally focused stock exchange at the time, GDAX, which helped it interact with Coinbase’s retail consumer platform. Later, GDAX became Coinbase Pro.
One resource, Hedger, projected how much inventory the company would need for its institutional exchange GDAX. Transfers between the two locations would be reported as turnover, which the CFTC considers to be erroneous reports. In addition, another feature, called Replicator, would replicate the depth of the primary order book for a specific asset in order books in other pairs. The company has never disclosed these characteristics to its customers, according to the CFTC.
“According to the order, such transactional information is used by market participants to discover prices related to the trading or ownership of digital assets and potentially resulted in a perceived volume and liquidity level of digital assets, including Bitcoin, which was false, misleading, or inaccurate, “said the CFTC.
In addition, the regulator focused on the alleged washout negotiation that took place on the platform.
“The order also finds that over a six-week period – August to September 2016 – a former Coinbase employee used a manipulative or deceptive device when intentionally placing buy and sell orders on the Litecoin / Bitcoin trading pair on GDAX that matched each other. trades. This created a deceptive appearance of liquidity and commercial interest at Litecoin. Coinbase is therefore held indirectly responsible as the primary conduct of that employee, “said the CFTC in its statement.
According to the consent request explained in more detail:
“In a few days, employee A’s trading on the Litecoin / Bitcoin trading pair between accounts he owned and controlled, constituted a substantial percentage of the trading volume on the contract, ranging from just 0.62% to up to 99.0% of the daily trading volume. ”
According to the consent order, which is included below, Coinbase did not admit or deny the CFTC’s conclusions.
The word for the CFTC investigation was presented in the company’s S-1 file, published last month before its planned direct listing. In the process, Coinbase said that in July 2017, the agency “initiated an investigation that covered topics, including a 2017 Ethereum market event, trades made in 2017 by one of the company’s employees at the time, the Bitcoin Cash listing on platform company and the design and operation of certain algorithmic functions related to liquidity management on the Company’s platform. “
CFTC commissioner Dawn Stump commented on the deal in a competing statement, emphasizing the desire to “ensure that the public is not induced to believe that the CFTC regulates exchanges like Coinbase. It does not.”
Stump effectively blamed the agency for his investigation and continued to write that “the charges against Coinbase filed and resolved by the Commission are based in large part on conduct that has been going on for several years.”
“Although I agree with the conclusions and terms of the Resolution before us today, I question whether the Commission has fulfilled its previous responsibilities in this case,” she concluded.
Enf Coin Base Order 031921 by MichaelPatrickMcSweeney on Scribd
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