The settlement requires Coinbase to pay $6.5mn, and desist from any further violations of the Commodity Exchange Act or CFTC regulations.
The CFTC (US Commodity Futures Trading Commission) has ordered digital asset exchange operator Coinbase to pay USD 6.5 million for reckless false reporting and wash trading by a former employee on its electonic trading platform.
Between January 2015 and September 2018, Coinbase is said to have delivered false, misleading, or inaccurate reports concerning transactions in digital assets, including Bitcoin, on the GDAX electronic trading platform it operated.
“As a result of Coinbase recklessly reporting the transactions that resulted from its programs matching orders with one another, Coinbase reported false, misleading or inaccurate market information about the volume and liquidity of trading on GDAX,” the CFTC said.
The CFTC issued an order filing and settling charges against Coinbase for “reckless false, misleading or inaccurate reporting”, as well as for wash trading by a former employee.
The former employee “intentionally placed buy and sell orders in the Litecoin/Bitcoin trading pair on GDAX, which he intended to match with one another and result in no loss or gain while creating the appearance of liquidity and trading interest in Litecoin,” the CFTC said. “Ultimately, the transactions resulted in wash transactions that depicted a misleading picture of the Litecoin/Bitcoin market.”
In addition to the penalty, the order requires Coinbase to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations.
“Reporting false, misleading, or inaccurate transaction information undermines the integrity of digital asset pricing,” CTFC Enforcement acting director Vincent McGonagle said. “This enforcement action sends the message that the Commission will act to safeguard the integrity and transparency of such information.”
Separately, commissioner Dawn Stump clarified that the CFTC does not regulate digital asset exchanges but nevertheless agreed findings that Coinbase violated anti-manipulation provisions of the Commodity Exchange Act and the CFTC’s rules.
“I write separately, though, to ensure the public is not misled to believe that the CFTC regulates exchanges such as Coinbase. It does not,” Stump said, explaining that the Commodity Exchange Act has always provided the Commission with certain limited enforcement.
The settlement comes ahead of Coinbase’s planned stock market listing. Considered the largest cryptocurrency exchange in the world, Coibase is valued at around USD 68 billion based on private market transactions, Reuters reported.