According to a Friday announcement, Coinbase has agreed with the Commodity Futures Trading Commission and will pay a fine of $ 6.5 million.
The settlement focused on two areas: information on trading activities on Coinbase’s GDAX trading platform and allegations of laundering 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 provided false, misleading or inaccurate reports about transactions in digital assets, including Bitcoin, on the GDAX electronic trading platform it operated.
The issue was linked to two features of the then institutional focus, GDAX, which helped it communicate with Coinbase’s retail consumer platform. GDAX later became Coinbase Pro.
One feature, Hedger, projected how much stock the company would need from its institutional exchange GDAX. Transfers between the two venues are reported as trading volume, which the CFTC considers to be incorrect reporting. Furthermore, another feature called Replicator will repeat the depth of the primary order book for a specific asset in other pairs in order books. According to the CFTC, the firm never disclosed these features to its clients.
“According to the order, transaction information of this kind is used by market participants for price discovery related to the trading or possession of digital assets, and this may have led to an alleged volume and level of liquidity of digital assets, including Bitcoin, which false, misleading, or inaccurate, “the CFTC said.
In addition, the regulator tuned in to alleged laundry trades that took place on the platform.
“The order also finds that a former Coinbase employee over a period of six weeks – August to September 2016 – used a manipulative or deceptive device by intentionally placing buy and sell orders in the Litecoin / Bitcoin trading pair on GDAX “This coincides with each other as laundry. This created the misleading appearance of liquidity and trading interest in Litecoin. Coinbase is therefore held liable as a principal for the actions of this employee,” the CFTC said in its statement.
As the consent order further explained:
‘On some days, employee A’s trading in the Litecoin / Bitcoin trading pair between accounts he owned and controlled accounted for a significant percentage of the trading volume in the contract, ranging from as little as 0.62% to as much as 99.0% of the the daily trading volume. ”
According to the consent order below, Coinbase did not acknowledge or deny the findings of the CFTC.
The word of the CFTC investigation can be seen in the company’s S-1 filing, which was published last month before the planned direct listing. In the submission, Coinbase said that in July 2017, the agency launched an investigation that includes topics including an Ethereum market event in 2017, conducted in 2017 by one of the company’s current employees, and the listing of Bitcoin Cash on the company’s platform, 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 settlement in a statement, stressing the desire “to ensure that the public is not misled into believing that CFTC exchanges regulate like Coinbase. It does not . “
Stump effectively instructed the agency for its investigation and further wrote that “the charges against Coinbase brought and settled by the Commission are largely based on conduct that is several years old.”
“While I agree with the findings and conditions of the settlement order before us today, I question whether the Commission has fulfilled the foregoing responsibilities in this matter,” she concluded.
Enf Coin Base Order 031921 by MichaelPatrickMcSweeney on Scribd
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