There has been a development in the Ontario Securities Commission’s (OSC) case against Coinsquare Ltd., which the regulator alleged had conducted wash trading, with a Panel of the regulator reaching a settlement with the company, as well as Cole Diamond, Virgile Rostand and Felix Mazer.
Wash trading is the illegal practice of inflating exchange volumes to show fake liquidity. According to a statement from the OSC earlier today in Canada, the settlement agreement relates to market manipulation on the Coinsquare platform, misleading statements to investments and a reprisal against an internal whistleblower.
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Coinsquare admits to market manipulation
By agreeing to the settlement, the cryptocurrency trading platform has admitted to engaging in market manipulation by reporting inflated trading volumes. In particular, between the 17th of July 2018 until the 4th of December 2019, the trading platform reported around 840,000 wash trades amounting to an estimated 590,000 bitcoins. This represented more than 90 per cent of the reported trading volume on its platform.
Coinsquare has also admitted that it made misleading statements to conceal the wash trades following a number of clients and members of the public questioning the suspicious trading volumes.
CEO and President to Resign
As part of the settlement agreement, the CEO of Coinsquare, Diamond, and President and Founder Rostand, have agreed to both resign from their positions and pay administrative penalties of $1 million and $900,000, respectively.
Under the settlement, Diamond and Rostand have been banned as acting as registrants, directors or officers of other market participants for three and two years, respectively. Furthermore, the conditions of the settlement prohibit the two from influencing the management of the Coinsquare platform for at least three years.
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Mazer, on the other hand, who is an executive at Coinsquare, will be subject to a one-year ban from acting as a director or officer of a registrant, or from holding a position that requires registration, the OSC said in its statement.
The settlement reached between the two parties also shows that Mazer has resigned from his role as Chief Compliance Officer (CCO) and that he has made a voluntary payment of $50,000 to the regulator.
With the settlement being agreed to, Coinsquare, Diamond and Rostand will pay a total of $300,000 to cover the costs of the OSC’s investigation into the trading platforms misconduct.
OSC: Coinsquare lied to investors
Commenting on the settlement, Jeff Kehoe, Director of the Enforcement Branch at the OSC said in the statement: “Despite several employees raising concerns about inflated trading volumes, Coinsquare not only stuck with the practice, but lied to investors about it and retaliated against a whistleblower.
“Being an innovator in our capital markets is not a free pass to disregard Ontario securities law. All market participants – including those in novel industries – must act honestly and responsibly.”
Following the settlement, Coinsquare and its subsidiary, which are seeking registration with the OSC (Coinsquare Capital Markets Ltd.) will need to implement “substantial corporate governance improvements,” the regulator said.
“Once corporate governance changes are made, Coinsquare Capital Markets must resubmit complete and updated applications for registration to the OSC and to the Investment Industry Regulatory Organization of Canada (IIROC),” the Canadian authority said in its statement earlier today.
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