Coinbase was fined $ 6.5 million by the CFTC for past transactions

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2021-03-22 00:17:48

Coinbase will have to pay a $ 6.5 million fine to settle unofficial cryptocurrency trading allegations between 2015 and 2018.

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Crypto exchange Coinbase will pay $ 6.5 million in a mediation agreement With the Commodity Futures Trading Commission (CFTC) on allegations the exchange was “self-trading”.

According to an approval order released by the commodity regulator on Friday, Coinbase itself traded small amounts of cryptocurrencies between 2015 and 2018 through two of its automated trading programs. An employee who is currently a former employee of the exchange was also accused of laundering money on some Litecoin during that time period.

One of these programs is designed to predict the amount of any given cryptocurrency Coinbase is expected to sell on its retail brokerage app. The system will then buy the recommended amount of cryptocurrency through its professional trading department (GDAX, now known as Coinbase Pro) and keep it in the exchange’s coffers.

A report from the US Treasury Department and some financial regulators said in 2014. This type of market activity can be seen as wash trading, in which an entity can pump the volume of an asset to make it seem like like there are more activities than reality.

Importantly, the CFTC does not allege that any Coinbase client has been harmed or that any misconduct has occurred. Rather, they describe the act as reckless but not on purpose. However, the CFTC also states that Coinbase has long discontinued these actions.

Coinbase appears to have revealed the existence of this action in Form S-1, which the company filed prior to publicly listing its shares on the Nasdaq.

The CFTC has begun to investigate “transactions made in 2017 by one of the Company’s current employees,” in accordance with form S-1. The investigation also included “the design and operation of certain algorithmic functions related to liquidity management on the Company’s platform”.

Although the CFTC has conducted other investigations against Coinbase, according to S-1, including the Ethereum “market event” and the listing of Bitcoin cash, this is the only investigation that the exchange predicts will be. has “serious adverse effects” on current operations.

In a consent statement released to the settlement agreement, CFTC Commissioner Dawn Stump said that while she agrees with the regulator’s findings, she still wants to ensure the public knows that the CFTC is not regulating. spot exchanges.

“The fines are mainly based on behavior that has been around for a few years, has not been repeated, and in the case of secondary liability, is based on the behavior of an employee who left Coinbase years ago and who has not been forced guilty, ”she added.

In a statement shared with CoinDesk, a Coinbase spokesperson said the company neither acknowledged nor denied the findings, but said during the process it had not discovered any Coinbase customers suffered losses. harm.

“We believe that there should be clear and reasonable regulations to provide a stable trading environment for all market participants. Because of this, we have actively engaged with the CFTC throughout their investigation and we believe our conversations are constructive and contribute to satisfying results for both parties, “The spokesperson said.

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