The CFTC – Commodity Futures Trading Commission has filed a $6.5 million fine for Coinbase. The exchange is accused by the regulators of wash trading and creating a false report, thereby misleading market participants.
According to the order from the CFTC, between 2015 and 2018, a former employee at Coinbase has reportedly been engaged in various violations using the GDAX platform. The crypto exchange has gotten an order to desist from further violations.
Based on an official release, “Coinbase has been accused of recklessly releasing misleading, inaccurate, and false reports about transactions around digital assets which includes Bitcoin on the GDAX platform that the exchange is operating.”
The exchanged operated two automated trading programs called Replicator and Hedger. The bots are known for generating orders for trading that will be replicate each other. According to the order, the exchange did not file a report with the CFTC that it is running multiple accounts.
While Coinbase was trading on GDAX, there was not a disclosure that the exchange is trading through different accounts and is running more than one trading program. However, the order found out that Replicator and Hedger were for different objectives and purposes, but practically trading orders from the programs were matched with each other in some particular trading pairs, which result in trades between the same accounts owned and operated by Coinbase.
The details of the trade from the bots are then uploaded on the exchange’s website unfiltered. Then, bodies like the NYSE Bitcoin Index, Chicago Mercantile Exchange (CME), CoinMarketCap, OpCo downloaded the data and repeated it on their platforms.
This kind of information relating to transactions is used by the market users for the sole purpose of price discovery concerning owning and trading their digital assets, which can likely result in having a wrong perception of the trading volume and the level of liquidity of the asset, including BTC. This is quite misleading, inaccurate, and false; the order reads further.
Inaccurate Liquidity in the BTC/LTC Trading Pair
Also, the CFTC has uncovered more evidence that shows that the earlier mentioned employee of the exchange manipulated the BTC/LTC trading pair between September and November 2016. This action creates more false and inaccurate liquidity reports. As of now, the name of the culprit has not been revealed yet.