Coinbase pays $6.5 million to settle charges by CFTC of fraudulent “wash trades” in Bitcoin and Litecoin

The US Commodity Futures Trading Commission (CFTC) said on Friday digital asset exchange Coinbase Inc paid $6.5 million to settle charges it reported misleading transaction data that potentially inflated the apparent trading volume on its professional GDAX platform. The fine was issued for  “wash trades” in litecoin and bitcoin by a former Coinbase employee on GDAX, it said in a statement. Wash trading is an illegal activity in which a trader buys and sells a security for the express purpose of feeding misleading information to the market. In some situations, wash trades are executed by a trader and a broker who are colluding with each other, and other times wash trades are executed by investors acting as both the buyer and the seller of the security. Wash trading is illegal under U.S. law, and the IRS bars taxpayers from deducting losses that result from wash trades from their taxable income.

Between January 2015 and September 2018, two Coinbase-operated trading programs matched orders with one another, resulting in transactions between accounts owned by Coinbase. GDAX disclosed that Coinbase was trading on GDAX but failed to disclose it was operating more than one trading program and through multiple accounts, the CFTC said.

Jeffrey Newman represents whistleblowers including Securities & Exchange Whistleblowers, IRS and Commodity Futures Trading Commission whistleblowers nationwide. He can be reached at 617-823-3217 or at Jeffrey.Newman1@gmail.com