The CEO of Coinsquare, Cole Diamond and President Virgile Rostand will step down under an agreement with the Canadian regulator, the Ontario Securities Commission, and will pay a $ 1.6 million fine (OSC).
According to an OSC announcement after a July 21 hearing, Diamond and Rostand have have agreed to close their positions on the cryptocurrency exchange and will pay fines of approximately $ 750,000 and $ 670,000 respectively. Coinsquare and the disgraced duo will also bear research costs of $ 223,000.
The Canadian regulator said that Diamond and Rostand are effectively prohibited under the contract from resuming Coinsquare management for at least three years. and they cannot act as “participants and directors or officers of a participant”. Felix Mazer, Chief Compliance Officer (COO), had already resigned and paid USD 37,000 to the OSC, but he will have a similar ban for a year.
The deal between Coinsquare, Diamond, Rostand and Mazer comes after the Canadian regulator claimed on July 16 The exchange had manipulated the market and artificially increased its trading volume by executing market transactions free of charge for its own orders. This practice creates the appearance of doing large business without assets changing hands and is an industry-wide problem.
“Although several employees expressed concerns about the excessive trade volume, Coinsquare not only remained in practice, but lied to investors about it and retaliated against an informant“said Jeff Kehoe, director of the OSC enforcement department.” Being an innovator in our capital markets is not a free pass to ignore the Ontario Securities Act. “
Admit evil deeds
As part of your agreement with the OSC Coinsquare has admitted that it was involved in market manipulation by reporting excessive trade volumes and that he “made misleading statements to hide it”.
Between July 17, 2018 and December 4, 2019 Coinsquare performed about 840,000 washes with an added value of 590,000 Bitcoin (BTC), $ 5.5 billion at press time. These operations accounted for more than 90% of the volume reported on the exchange.
The problem of market manipulation in this type of operations is an endemic problem in the cryptocurrency industry. According to a study by Bitwise Asset Management filed with the Securities and Exchange Commission in March 2019, Up to 95% of the cryptocurrency market volume reported to CoinMarketCap could have been the result of laundering. The Blockchain Transparency Institute reported in September last year that the wrong volume of BTC trading was around 50%.