Canada Crypto Exchange Coinsquare Accused of Wash Trading by Watchdog

Ontario
Policy & regulation
20 July 2020

Canadian crypto trading platform Coinsquare has been accused by the Ontario Securities Commission (OSC) of inflating its trading volumes in an illegal practice called wash trading.

  • In a Statement of Allegations from the OSC, filed last Thursday, the regulator alleges Coinsquare CEO Cole Diamond, founder Virgile Rostand and executive Felix Mazer knowingly manipulated markets via fake trading volumes and “authorized, permitted or acquiesced in this conduct” by the firm's staff.
  • Staff were directed by Diamond to engage in wash trading activity, while Rostand designed and implemented the code to carry out the activity, the statement alleges.
  • Mazer was Coinsquare’s chief compliance officer (CCO) from May 2018 until June 2020, but he “failed to take steps that a reasonable CCO would have taken,” the commission said.
  • The regulator said fake trades represented 90% of Coinsquare's reported volume between July 2018 and December 2019.
  • It also alleges that between July 17, 2018, and December 4, 2019, approximately 840,000 wash trades were conducted on the platform with an aggregate value of around 590,000 bitcoin (worth over $5.4 billion at press time).
  • When a Coinsquare whistleblower repeatedly sought to expose the illicit activities, the company carried out reprisals against them, the OSC claims.
  • The alleged misconduct also occurred while Coinsquare was applying to the OSC to register a subsidiary, Coinsquare Capital Markets Ltd. In the process, the platform concealed these activities from OSC staff.
  • The OSC statement came after a report by Motherboard, Vice Magazine's tech section, last month saying Coinsquare had engaged in wash trading.
  • It based the report on leaked emails, Slack messages and other sources of information.
  • The OSC Secretary will now hold a hearing to determine whether it is in the public interest to approve a settlement agreement between the OSC and Coinsquare.
  • The hearing will be held on July 21, 2020, at 19:30 UTC.

See also: Canada’s Financial Crimes Watchdog Gets Ready for FATF Compliance

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