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Coinsquare’s Execs To Resign And Pay $2 Million Over Wash Trading Scandal 

Following allegations leveled against a Canadian cryptocurrency exchange, Coinsquare for conducting “wash trading” on its platform, the Ontario Securities Commission (OSC) has settled charges with the firm. 

Coinsquare Settlement Charges

According to the verdict, the exchange’s President, Virgile Rostand, and CEO Cole Diamond, who reportedly ordered employees to carry out wash trading, have agreed to resign and pay a fine of CA$900,000 and CA$1 million, respectively. 

Furthermore, the exchange, as well as Rostand and Diamond, are to pay an additional CA$300,000 to cover the OSC’s cost of investigation of the matter.

Coinsquare’s Chief Compliance (CCO), Felix Mazer, was not spared in the scandal, as he has resigned from the position and paid a voluntary CA$50,000 to the commission.

In addition, both Rostand and Diamond are banned from acting as registrants, officers, or directors of companies within the OSC jurisdiction for two to three years, while Mazer got a one year ban. 

For a moment, a user of the exchange complained on Reddit that they were unable to withdraw their funds. But Coinsquare has responded by saying that it did not ‘pause withdrawals across the platform,’ and that the specific withdrawal issue has been rectified.

How it All Started

Based on a tip from Vice’s publication Motherboard reported last month, Coinsquare was accused of having conducted wash trading, an act of making fake trades to boost trading volumes, between 2018 and 2019. 

Coinsquare had created multiple fake accounts while trading between them, to generate outrageous transactional records to lure more investors. 

Several leaked messages, emails, and documents were published online, associating Coinsquare with the practice. 

Excerpts of the messages reveal that employees were not comfortable with the practice as it could destroy their careers if caught. However, Diamond would not have any of it as he forced them to continue. 

The allegations prompted the OSC to launch an investigation into the matter that subsequently led to the exchange admitting that around 840,000 wash trades, which amounts to 590,000 bitcoins ($5.5 billion), were carried out on the platform. 

The data implies that 90% of Coinsquare’s trade volume was faked to lure more investors. 

Wash Trading is Illegal

The practice of wash trading is deemed illegal in different parts of the world, including Canada. It is believed to be conducted to lure unsuspecting investors into believing that the trading platform is active, contrary to the OSC laws. 

According to excerpts of the OSC laws, no company or person shall act in a way that “results in or contributes to a misleading appearance of trading activity in, or an artificial price for, a security, derivative or underlying interest of a derivative.”

UPDATE: We have updated this article to include Coinsquare’s response to an alleged temporary halt of withdrawal on the platform.

Image: Coinsquare President, Virgile Rostand

 

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