Canadian Regulator Alleges Coinsquare for Wash Trading

The Ontario Securities Commission (OSC) has officially moved against crypto exchange Coinsquare for its involvement in wash trading, the illegal practice of inflating the exchange volumes to show fake liquidity.

The exchange has allegedly involved in such illegal activities between July 2018 and December 2019 and inflated over 90 percent of its reported trade volumes.

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According to a statement of allegation published on Thursday, the Canadian state regulator accused the exchange’s CEO Cole Diamond, founder Virgile Rostand, and executive Felix Mazer for manipulating the trading volume.

The regulator detailed that Diamond ordered the staff to involve in generating fake trading volumes while Rostand designed and implemented the code to carry out the illegal activity.

Mazer is named as he was the exchange’s chief compliance officer from May 2018 until June 2020, but failed to prevent such illegal activities.

The official statement alleged that “Coinsquare engaged in market manipulation through the reporting of inflated trading volumes” and it also “misled its clients about trading volumes and Diamond and Rostand authorized, permitted or acquiesced in this conduct.”

Established in 2014, Coinsquare offers trading services with some top digital currencies including Bitcoin, Litecoin, and Ether, and had around 235,000 clients by the end of last year.

The allegations on the exchange first came last month when VICE reported its involvement in wash trading showcasing many leaked emails, Slack chats, and other files.

Wash trading – a common practice in crypto

Though some employees raised concerns over the inflated volumes, the exchange continued with its illegal practice and also took reprisal against an internal whistleblower and Diamond authorized, permitted or acquiesced in this conduct.

Notably, many leading crypto exchanges were also accused of inflating trading volumes, but very little actions were taken on them for such practices.

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