Washington, D.C. – Coinbase Inc., a San Francisco-based digital asset exchange, has been ordered to pay $6.5 million and cease further violations of commodity trading regulations, the Commodity Futures Trading Commission (CFTC) announced Friday. The charges stem from reckless false reporting and wash trading that occurred between January 2015 and September 2018 on Coinbase’s GDAX platform.
The CFTC found that Coinbase recklessly provided inaccurate transaction data concerning digital assets, including Bitcoin, on GDAX. The exchange operated two automated trading programs – Hedger and Replicator – which frequently matched orders with each other. While Coinbase disclosed its trading activity on GDAX, it failed to reveal the use of multiple trading programs and accounts.
According to the order, these programs sometimes executed trades between Coinbase-owned accounts, and this data was included in reports provided to services like Crypto Facilities Ltd. (used in the CME Bitcoin Real Time Index) and CoinMarketCap OpCo, LLC. The NYSE Bitcoin Index received data directly from Coinbase. The CFTC alleges this inaccurate information artificially inflated the perceived trading volume and liquidity of digital assets.
Furthermore, the investigation revealed a former Coinbase employee engaged in manipulative wash trading of Litecoin/Bitcoin trading pairs on GDAX between August and September 2016. The employee intentionally placed matching buy and sell orders to create a false impression of trading activity. Coinbase is held vicariously liable for the actions of this employee.
“Reporting false, misleading, or inaccurate transaction information undermines the integrity of digital asset pricing,” stated Acting Director of Enforcement Vincent McGonagle. “This enforcement action sends the message that the Commission will act to safeguard the integrity and transparency of such information.”
The case was led by CFTC staff members Jon J. Kramer, Bryan T. Hsueh, Elizabeth N. Pendleton, Scott R. Williamson, and Robert T. Howell.
Source: CFTC.gov
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