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Summary
- Ontario Securities Commission has launched investigation against Canadian crypto trading platform Coinsquare, its founder Virgile Rostand, CEO Cole Diamond and Chief Compliance Officer Felix Mazer
- The crypto trading platform allegedly manipulated markets and investors with wash trades representing over 90 percent of its reported trading volume
- Coinsquare also terminated internal whistleblower employee who raised concerns and sought to expose the illegal activities
- Hearing on the matter scheduled on July 21
The Ontario Securities Commission (OSC) has initiated investigation proceedings against Canadian crypto trading platform Coinsquare following allegations of wash trade, an illegal practice of inflating trading volumes.
The regulatory watchdog has also launched investigation against Coinsquare founder Virgile Rostand, CEO Cole Diamond and Chief Compliance Officer Felix Mazer.
In the Statement of Allegation (SoA), the OSC alleges that Coinsquare and its three named executives wrongly influenced the markets by reporting fake or wash trades representing over 90 percent of the reported trading volume between July 2018 and December 2019. The SoA was filed on July 16.
Following Coinsquare CEO’s directions to inflate its reported trading volumes, Rostand wrote an algorithm “to inflate Coinsquare’s trading volume”, reports the OSC. Despite protests, employees were forced to implement it and mislead investors, adds the statement.
Approximately 840,000 wash trades were conducted on Coinsquare, holding an aggregate value of 590,000 bitcoins worth over $5.4 billion. The inflated figures were published on the official website and later picked up by other websites.
When the suspicious volumes were questioned in public, the trading platform posted “misleading statements”, including responses to posts on social discussion platform Reddit.
Coinsquare also took reprisals against an internal whistleblower, formally terminating the individual’s employment after the later raised concerns on inflated trading volumes and sought to expose the illegal activities.
The OSC statement came after a media report, based on leaked internal emails, Slack messages and other files, alleged that Coinsquare has been artificially inflating how much currency it is trading.
The OSC hearing on the matter is scheduled on Tuesday, July 21, 2020.
Launched in 2014, Coinsquare is Toronto-based trading platform assisting the buying and selling of bitcoin, litecoin and ether. As of December 14, 2019, it had approximately 235,000 accounts.
In crypto exchanges, wash trade is a form of market manipulation where it seems like more currency-based transactions are taking place. In reality, the crypto exchange is trade with itself on its own platform. These inflated figures send out an attractive message to potential investors.
In 2018, nearly 80 percent of top 25 trading pairs for bitcoin at cryptocurrency exchanges were wash traded, says a research by the Blockchain Transparency Institute.
