The Commodity Futures Trading Commission (CFTC) has fined cryptocurrency exchange Coinbase $6.5 million “for reckless false, misleading, or inaccurate reporting as well as wash trading.” This enforcement action came as Coinbase is getting ready for its initial public offering (IPO) on Nasdaq.
CFTC Takes Action Against Coinbase
The CFTC announced Friday that it has issued an order settling charges against cryptocurrency exchange operator Coinbase Inc. “for reckless false, misleading, or inaccurate reporting as well as wash trading.” The regulator wrote:
The order requires Coinbase to pay a civil monetary penalty of $6.5 million and to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations.
The order described that between January 2015 and September 2018, “Coinbase recklessly delivered false, misleading, or inaccurate reports concerning transactions in digital assets, including bitcoin,” on its GDAX platform.
The CFTC found that while Coinbase disclosed that it was trading on the GDAX platform, it failed to disclose that it “was operating more than one trading program and trading through multiple accounts.” The derivatives watchdog elaborated that during the above period, the company “operated two automated trading programs, Hedger and Replicator, which generated orders that at times matched with one another.”
Moreover, the regulator clarified that “while Hedger and Replicator had independent purposes, in practice the programs matched orders with one another in certain trading pairs, resulting in trades between accounts owned by Coinbase.” The crypto exchange “included the information for these transactions on its website and provided that information to reporting services,” including Crypto Facilities, Coinmarketcap, and the NYSE Bitcoin Index. The CFTC clarified:
Transactional information of this type is used by market participants for price discovery related to…