In the latest blow to Coinsquare, the beleaguered Canadian crypto-currency exchange, reports accuse the platform’s top executive of orchestrating a money-laundering scheme in clear violation of the securities law.
Wash trade“ refers to when an exchange artificially inflates its trading volume by executing large market transactions at no cost on its own orders, creating the appearance of large trading activity without any assets changing hands. This practice is illegal in traditional asset markets because of its propensity to price manipulation.
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The accusations made against Bitcoin Code were reported by Vice on June 13, when the publication claimed to have obtained leaked emails, messages from Slack, and other files incriminating the exchange’s CEO, Cole Diamond.
The accusations follow reports of a major data hack that showed more than 5,000 customer email addresses at risk of SIM exchange attacks earlier this month.
Coinsquare accused of falsifying volume
A March 2019 e-mail exchange cited by Vice reportedly details an incident in which an employee was disciplined for disabling the code that drove internal activity because he did not want to „test the [Ontario Securities Commission] OSC“ with the practice.
Cole’s response stated that the individual did not take into account the „huge change“ in public perception of the platform’s liquidity that could result from the cessation of the wash trade, adding: „Turn it back on.
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The correspondence also noted that „the decision to continue with laundering trading was final on Cole’s part“, and the documents also described the efforts of senior Coinsquare officials to crack down on the use of the term „laundering traading“ in digital communication because of concerns about paper tracking.
Suspicions about Coinsquare’s trading volume have persisted since at least 2018, when multiple Reddit users began speculating that much of the exchange’s volume might be fake.