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Canadian Regulator Charges Coinsquare Executives For Crypto Market Manipulation

Nicholas Otieno   Jul 23, 2020 10:01 3 Min Read

The Ontario Securities Commission (OSC), Canada’s largest market regulator, has settled charges with Coinsquare cryptocurrency exchange. The executives of the Toronto-based crypto exchange firm have not only agreed to step aside from the firm but also to pay administrative penalties as part of an agreement with the regulator. The commission found the cryptocurrency exchange had engaged in market manipulation, which is a violation of the Ontario Securities law.  

Weird Crypto Market Cybercrime

In a hearing held on July 21, the Ontario Securities Commission approved a settlement reached between the regulator and Coinsquare. As part of the settlement, Coinsquare president Virgile Rostand and CEO Cole Diamond admitted to authorizing market manipulation through reporting of inflated trading volumes. Furthermore, Diamond admitted to have retaliated against an internal whistleblower who reportedly raised several concerns about the practice.  

As a result, Rostand and Diamond agreed to resign from their positions and paid penalties of $900,000 and $1 million respectively, the regulator said.

Rostand and Diamond have also been banned from acting as directors and registrants for three years. This means that they cannot influence the management of the company for the stated period. Felix Mazer, Coinsquare’s Chief Compliance Officer, also was accused of failing to fulfil the duties of his crucial role as the CCO. As part of the agreement, Mazer has also resigned from his position and paid $50,000 to the regulator. Mazer has also been banned from acting as an officer of a registrant or a direction for one year.

As a company, Coinsquare is also required to pay $200,000.

The regulator has ordered Coinsquare to obtain new management and seek compliance with the IIROC (Investment Industry Regulatory Organization of Canada) and other regulations. The crypto company also has been ordered to create an independent whistleblower program, an independent board of directors, and implement processes to ensure its trading platform aligns with securities laws.

According to the regulator, Coinsquare engaged in market manipulation by inflating 90% of its trading volumes with fake trades between 2018 July and 2019 December.

The OSC’s director of enforcement, Jeff Kehoe, said that the settlement is a significant milestone as it marks the first time a firm has been disciplined under 2016 laws barring retaliation against a whistleblower.

Consequences of Crypto Market Manipulation

Instances of the crypto market being manipulated have existed for a long time now.  However, market manipulation is not just a concern with the cryptocurrency market. Traditional financial also suffers from the problem. But because of the liquidity of the traditional financial market, it is harder and more difficult to spot market manipulations. Traditional financial markets are much more heavily regulated than the cryptocurrency markets. While in recent years, market manipulations have slowed in the crypto industry when compared to earlier days, there is still clear evidence of the problem. The crypto space, which is still largely unregulated, suffers a lot. There are a lot of losers, and very few winners from this situation and impacts are highly detrimental to the cryptocurrency industry.  

 

 


Image source: Shutterstock

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