Coinbase Slammed With $6.5 Million Fine For Regulation Breach
In a recent news coming from the crypto space, Coinbase has agreed to pay a hefty fine for breaching regulatory protocol. The update that the US United States CFTC shared pointed out that Coinbase has agreed that they will pay $6.5 million to settle out of court.
The CFTC previously levied an allegation against the crypto exchange due to the way transactions were recorded on their GDAX platform some years ago. Coinbase was said to have carried out the act between 2015 to the latter parts of 2018. Now, Coinbase pro, the GDAX platform, provided trading services to only high-value investors and traders.
Coinbase carried out the act using its GDAX platform
The CFTC said that the GDAX platform provided fake, misleading information regarding the trades carried out on the platform in the time mentioned. The regulator noted that the firm carried out numerous transactions using digital assets such as Bitcoin and failed to enter accurate transaction data in their books. The CFTC said that the exchange could carry out these illegal acts using software, which is known as Hedger and Replicator.
The software was said to have been developed by the in-house engineers and developers at Coinbase. CFTC pointed out that at the time, the exchange used the software to carry out imaginary trades between themselves, hence driving up the amount of transactions carried out on the platform.
The act was also noted to have increased the digital assets’ price due to the fake volume that the crypto exchange recorded. It was not until 2018 that the COO of the company, Asif Hirji, expressed concern over the use of such software and talked about the associated risks. It was then that the crypto exchange stopped using the software and started using a third party to conduct transactions.
Coinbase did not confirm or deny the allegations
The CFTC also accused some former employees of the crypto exchange of carrying out what would be described as wash trading. Wash trading is a phenomenon that best describes an internal trade between two or more parties in the company. This was carried out to help the company drive up numbers and help increase the liquidity on the platform.
The regulator said that the employees carried out different trading pairs, including Litecoin and Bitcoin trading pairs. Some would place buy orders while others would place sell orders, matching their buying and selling. Even though the regulator has refused to identify the employees who committed the crime, it printed out a bulky part of the wash trading carried out in the fall period of 2016. It also mentioned that most of the employees that carried out the activities used Litecoin.
Despite that, many people have pointed that one of the employees might be Charlie Lee, who carried out a vast number of transactions using Litecoin during the period. Despite the allegations, Lee has failed to address the rumors at the time. Despite opting to pay the fine, Coinbase did not say if indeed they carried out the act or not.