Coinbase slapped with $6.5 million fine over ‘misleading’ cryptocurrency trading

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Coinbase has been fined $6.5 million for allegedly giving out misleading information about the cryptocurrency exchange’s trading practices, the Wall Street Journal reported.

In a news release, the Commodity Futures Trading Commission said that Coinbase had paid the amount as part of a settlement with regulators who accused the company of disclosing false transaction data.

The CFTC said the charges against Coinbase were for “reckless false, misleading or inaccurate reporting” on the company’s GDAX virtual asset platform.

Based on reports, the Coinbase Pro exchange ran two programs that sometimes traded Bitcoin (BTC) and Litecoin (LTC) with each other between 2015 and 2018 and included those trades with data shared with external services — which made the trade look like there was more volume in it than there really was.

Civil penalty, no big deal

The CFTC also fined the company for “wash trades” in the LTC and BTC tokens that were executed by a former Coinbase employee on the company’s GDAX platform. Wash trades are outlawed because they create a deceptive appearance of the trading volume.

In a statement by CFTC, it pointed out that Coinbase launched two automated trading programs known as “Hedger” and “Replicator” that sometimes matched each other’s trades.

Although the programs had separate objectives that weren’t specifically made to trade with one other, they, later on, did so— meaning Coinbase essentially traded with itself.

The penalty is civil, and the settlement amount is unlikely to affect the profits of Coinbase.

Not deliberate, CFTC says

The CFTC actually clarified that it did not accuse Coinbase of intentionally manipulating markets with its set of algorithms and suggested its trading was more careless than deliberate.

The activity occurred “many years ago,” and the Coinbase employee in question left the company years before the CFTC fine. According to CFTC Commissioner Dawn Stump, the company had not repeated the practice since.

Meanwhile, Coinbase said it was postponing its Initial Public Offering from March to April 2021. The change came moments after Coinbase filed an IPO draft registration to the U.S. Securities and Exchange Commission on December 18.

Image courtesy of Alesia Kozik/Pexels

Jet Encila

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Jet Encila

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