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Crypto exchange Coinsquare accused of wash trading by Canadian regulator OSC

Coinsquare is accused of misleading its clients by artificially inflating its trading volumes by wash trading.

Image by Miloslav Hamřík from Pixabay

Tue, 21 Jul 2020, 09:24 am UTC

Cryptocurrency exchange Coinsquare has been accused by the Ontario Securities Commission (OSC) of misleading its clients about its trading volumes. The OSC alleged that the Canada-based crypto trading platform engaged in market manipulation by inflating its trading volumes, Cointelegraph reported.

The OSC filed a Statement of Allegations on Thursday, July 16, alleging that Coinsquare engaged in wash trading, according to Coindesk. Wash trading is an illegal practice and is a form of market manipulation where an investor buys and sells the same financial instrument to create artificial market activity.

In its complaint, the OSC named Coinsquare, as well as its CEO Cole Diamond, its chief compliance officer Felix Mazer, and its founder Virgile Rostand, as respondents. “Staff of the Commission (Staff) bring this proceeding against Coinsquare Ltd. (Coinsquare), Cole Diamond (Diamond), Virgile Rostand (Rostand) and Felix Mazer (Mazer) (collectively, the Respondents) to hold them accountable for their misconduct and to send a message to other market participants in the crypto asset sector that deceptive conduct will not be tolerated in Ontario’s capital markets,” the agency wrote in the document.

The OSC said that Diamond Coinsquare’s staff to engage in wash trading activity, Coindesk reported. Meanwhile, Rostand reportedly designed and implemented the code used in the firm’s wash trading activity.

Coinsquare allegedly engaged in 840,000 wash trades from July 17, 2018, until December 4, 2019. During the period, the aggregate value of the trades reached around 590,000 Bitcoins.

The aggregate value of the wash trades (590K BTC) is worth over $5.4 billion based on the current Bitcoin price of $9,193. The wash trades also represent around 90 percent of the exchange’s trading volume.

Coinsquare’s wash trading activities continued despite concerns from the exchange’s staff. The firm reportedly terminated an internal whistleblower when the employee expressed concern over the company’s activities.

The OSC previously requested information about the firm's trading activity. However, Coinsquare failed to report any irregularity saying that the exchange is “taking steps to prevent market manipulation and highlighted controls it claimed could help detect such conduct.” The hearing for the case is scheduled for July 21.

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