Coinsquare Executives Charged With Wash Trading

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  • Three Coinsquare executives have been accused of wash trading by Canadian authorities
  • The trio are alleged to have faked at least 90% of their trading volume for some 18 months since July 2018
  • The company is looking to settle with the OSC

Three high ranking executives of Canadian cryptocurrency exchange Coinsquare, including the co-founders and CEO, have been charged with market manipulation by The Ontario Securities Commission (OSC) by reporting inflated trade volume numbers. The OSC reported last week that it is bringing the charges against co-founders Cole Diamond (CEO) and Virgile Rostand (President), and Felix Mazer, Coinsquare’s former CCO. The OSC alleges that the three individuals inflated the exchange’s trading volumes by reporting fake figures, also known as wash trading, between July 2018 and December 2019, with the false numbers thought to have represented the overwhelming majority of the reported volume during the period.

Wash Trading Made Up Over 90% of Coinsquare Volume

In outlining its case against the trio, the OSC states its desire to bring the trio to justice and “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 outlines three areas in which it perceives that Coinsquare broke the OSC’s trading laws:

  1. Coinsquare engaged in market manipulation through the reporting of inflated trading volumes;
  2. Coinsquare misled its clients about trading volumes and Diamond and Rostand authorized, permitted or acquiesced in this conduct; and
  3. Coinsquare took a reprisal against an internal whistleblower and Diamond authorized, permitted or acquiesced in this conduct

The OSC claims that Coinsquare’s wash trading made up “over 90% of its reported trading volume” between July 2018 and December 2019, software that was written by Rostand at Diamond’s direction.

Whistleblower Fired

The OSC reports that employees raised concerns over the practice of wash trading but the company continued regardless, with the “tone from the top” undermining the “compliance culture” at the company, resulting in one employee in particular eventually being fired months after raising their concerns, which could result in further charges being brought against the company.

Coinsquare is said to be seeking a settlement with the OSC, with a hearing set for tomorrow. Wash trading is a known issue in the cryptocurrency space, and was particularly bad during the 201 bear market when genuine volume was drying up.