Coinsquare CEO allegedly ordered its employees to make fake trades

[Hydrogen]

Good write up from vice. Here are some of the most relevent sound bytes.

Wash trading is illegal with stocks and futures, including the U.S., because it can be used to manipulate prices. Cryptocurrency has a particular problem with the practice; one study found that nearly 95 percent of all Bitcoin trading is artificially created by unregulated exchanges.

Several of the leaked documents specifically show Coinsquare CEO Cole Diamond pushing for the company to practice wash trading, and employees of the company being uncomfortable with the practice. The documents allege that Coinsquare performed wash trading at least during 2018 and 2019.

One employee who was able to disable the code decided to do so, seemingly in anticipation of an upcoming visit from regulators, according to the leaked material. In a Slack message, Diamond asked who disabled the code that managed internal trades.

"But whoever did that took ZERO steps to ensure that a MASSIVE change to how we are viewed externally would be enormous," Diamond replied. "Turn back on please."

External parties had already spotted something wrong with Coinsquare months earlier. In August 2018 cryptocurrency enthusiasts on Reddit noticed that much of Coinsquare's trading happened outside of normal trading hours. Others suspected Coinsquare was faking how much the company was really trading.

It is interesting how the world of low commission crypto trading has influenced the way stock markets do things. Brokers used to charge higher than $5 commissions for the buying/selling of stocks. Today they follow the crypto model for low or no commissions on trades. I would not be surprised to learn stock markets are on some level forging/faking trading volume identical to how crypto exchanges are being accused of here.

Payment processors like paypal are able to get away with so much shady behavior. I would guess that precedent will become normalized across the financial industry for those who have established ties with the right people.

[omone1]

This is bad and this is what they do to attract customers to their platforms and will never get a good experience. For this I hate Hotbit that keeps listing any trending coin to attract traders, they will disable withdrawals and their withdrawal fees are very high.

[thesmallgod]

Fake trade has long been identified by individual before this time and this is exactly reason why people complain a lot about the exchange ranking which was previously provided by the coinmarketcap before it was later adjusted when bought by the Binance. Coinsquare is a centralized exchange platform which to me is not that popular globally even though it has been in existence for almost six years. However, the punishment for faking volume will depend on the real evidence and also if there is any sanction provided in canada for any businesses that involve in something like this

[MCobian]

Not only Coinsquare exchange does fake trades, many other exchanges do the same thing. Therefore there is no guarantee of choosing
exchanges based on trading volumes. What Cole Diamond has done really pisses me off, people like him can harm many people. Do more
in-depth research to be able to find exchanges with real volume, so that we can avoid using exchanges that are have fake volumes.

[dunfida]

Is this thing still surprising?


Wash trading or fake volumes had been known in the past not only these things do exist on crypto world but also in other traditional markets as well.
Exchanges would really have that kind of act which doesnt only limit out on small exchange but also to bigger ones to retain up their
reputation in talks of liquidity or volume but everything can really be faked out.

[kryptqnick]

According to this, (https://www.vice.com/en_us/article/5dz35q/cryptocurrency-exchange-wash-trading-coinsquare)

Coinsquare CEO himself, Cole Diamond ordered his employees to make fake trades to give the impression that their trading exchanges has indeed lots of liquidity and performing and doing good. There is supposedly a leaked emails, Slack messages.

According to the material, Coinsquare was "wash trading," which means it was automatically buying and selling currency between accounts it controlled. The news provides evidence of a practice that is often suspected in the cryptocurrency world but rarely proven, and can draw attention from regulators.

"Turn it back on," one seemingly angry March 2019 Slack message from Coinsquare CEO Cole Diamond to other employees of the company read, referring to the code that managed internal trades after an employee switched it off, fearing retaliation from regulators.

We all know that this has been practice by low-tier exchanges, but we don't have proof yet. Tried to search this supposedly emails and messages to really see first hand, but so far can't find any.

And if this is true then its pretty damning evidence against Coinsquare and we will see how OSC (Ontario Securities Commission) will do, what are the punishments etc.

Trading volumes are never to be trusted. This is not the first time manipulations to increase them are in place, although I believe previous scandals were about significantly simpler 'solutions' such as just reporting the volume that is higher than the real one. Coinsquare here made a more sophisticated move with artificially but truly increasing the volume. All in all, perhaps we should stop evaluating exchanges by volumes and focus on other things like reputation, policies and the number of active users (the latter can also be manipulated, but I think it's less likely to make a big impact).