Cryptocurrency Exchange Coinbase vs. the U.S. regulator

Cryptocurrencies such as Bitcoin, Ethereum, and others gained popularity all over the world, and this fact highlights the importance of cryptocurrencies. However, there is no lack of issues as well. For example, the U.S. Commodities Futures Trading Commission (CFTC) imposed a fine on a world-famous cryptocurrency exchange Coinbase.

Interestingly, Coinbase was ordered to pay $6.5 million in restitution to resolve charges brought by CFTC for inaccurate reporting and wash trading on its institutional platform. According to the U.S. regulator, Coinbase delivered false reports concerning transactions in digital assets traded on the GDAX platform. This platform was then rebranded as Coinbase Pro.

Importantly, a series of unauthorized and fictitious transactions took place on the GDAX platform. People should keep in mind that, the abusive pattern happened as the cryptocurrency exchange operated two automated trading platforms, Hedger and Replicator. Platforms mentioned above, generated orders that at times matched with one another.

Cryptocurrency exchange Coinbase and illegal activities

It is worth mentioning that, Coinbase’s motive for executing the wash trades was to give the impression of deeper liquidity. Importantly, it gives real investors a better chance to move in and out of positions quickly. Furthermore, the wash trades artificially inflated Coinbase trading reported to the market. As a reminder, the more liquidity a cryptocurrency exchange appears to have, the more appealing it becomes to investors.

This is not the end of the story as this case is even more complicated. Interestingly, the order found that over a six-week period a former Coinbase employee entered equal and opposite transactions on Litecoin/Bitcoin trading pair on the GDAX program. This person was the counterparty on both sides of LTC/BTC trades. There was no commission. Moreover, it only added layers to their trading volumes.

As a reminder,  the illegal scheme occurred during the period between August and September 2016. The purpose of this scheme was to create a misleading appearance of liquidity and trading interest in Litecoin.

People should keep in mind that, despite this fine cryptocurrencies have the potential to change the world. Cryptocurrency exchange Coinbase and others should follow the rules and regulations to prevent such cases. Despite all challenges, there is no need to abandon cryptocurrencies. Companies, as well as experts, should work with authorities to limit the number of illegal activities. This way it will be easier to make cryptocurrencies more popular in different parts of the world.