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The Commodity Futures Trading Commission (CFTC) has fined cryptocurrency exchange Coinbase by US$6.5 million, “the reason is Lu false’s false, misleading or inaccurate reports and false transactions.” Coinbase is preparing for its first public announcement on Nasdaq. This kind of enforcement action was taken during the IPO.
The CFTC announced on Friday that it had issued an allegation of settlement orders against cryptocurrency exchange operator Coinbase Inc. “because of Lure’s false, misleading or inaccurate reports and false transactions.” The regulator wrote:
The order requires Coinbase to pay a civil fine of 6.5 million U.S. dollars, and stop and stop any further violations of the Commodity Exchange Act or the CFTC.
The order description stated that between January 2015 and September 2018, “Coinbase recklessly provided false, misleading or inaccurate reports on transactions of digital assets (including Bitcoin) on its GDAX platform” .
The CFTC found that although Coinbase disclosed that it was trading on the GDAX platform, it failed to disclose that it “is running multiple trading programs and trading through multiple accounts.” The derivatives regulator detailed that during the aforementioned period, the company “operated two automated trading programs, namely Hedger and Replicator, and the orders they generated sometimes matched each other.”
In addition, the regulator clarified: “Although Hedger and Replicator have independent purposes, in fact, the program matches orders with each other in certain trading pairs, which leads to transactions between accounts owned by Coinbase.” The crypto exchange “in Its website contains information about these transactions and provides that information to reporting services,” including crypto facilities, Coinmarketcap, and the New York Stock Exchange Bitcoin Index. The CFTC clarified:
Market participants use this type of transaction information to discover prices related to trading or owning digital assets, and may lead to false, misleading or inaccurate digital assets (including Bitcoin) liquidity and perceived levels.
In addition, the execution order also found that between August and September 2016, “a former Coinbase employee used manipulation or deception to deliberately place a buying and selling order in the litecoin/bitcoin trading pair on GDAX. Match each other as a handwashing transaction.” The order did not provide the name of the employee.
The CFTC pointed out that, on a certain day, the employee’s Litecoin/Bitcoin transaction between accounts owned and controlled by the employee accounted for a large proportion of the contract transaction volume, ranging from the smallest 0.62% to the largest. . Accounted for 99.0% of daily transaction volume. CFTC claims:
This creates a misleading appearance of Litecoin’s liquidity and trading interest. Therefore, Coinbase was deemed responsible for the employee’s behavior.
Charlie Lee, the founder of Litecoin, served as the Director of Engineering at Coinbase from July 2015 to June 2017. In December 2017, Li said that he sold and donated all his LTC, but he kept some physical objects as collectibles.
At the same time, Coinbase is preparing to conduct an initial public offering (IPO) through direct listing on Nasdaq, and will trade under the stock code COIN. However, according to Bloomberg News, the public offering has now been postponed to April. This week, Coinbase filed for an IPO to sell 114.9 million shares. On Wednesday, the company said that recent private market transactions valued the company at approximately US$68 billion, lower than its previous valuation of US$100 billion.
What do you think of the actions taken by the CFTC against Coinbase? Let us know in the comments section below.
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