Wash Trade Orchestration Allegations Surround Coinsquare CEO

Coinsquare, a Canada-based crypto exchange, has been given another hard hit as reports started to come out regarding the platform’s CEO orchestrating wash-trade events. These events were schemed out in clear violation of the law.

A Leak Revealed By Vice

Wash-trading itself refers to an exchange inflating its trade volumes artificially through the process of executing larger zero-fee market trades within their own orders. This creates the outside appearance of a large amount of trading activity, even if the assets themselves aren’t changing hands. As one would imagine, such an act is illegal within the markets for traditional assets, as it’s commonly used to enact price manipulation.

Vice first reported the accusations against Coinsquare, doing so on the 13th of June, 2020. The publication claimed to have obtained Slack messages, emails, and other files that were leaked. All these files incriminated one Cole Diamond, the CEO of the exchange.

Not Wanting To Anger the OSC

The allegations themselves came shortly after reports were made that a significant data hack had occurred on Coinsquare’s systems. This hack saw more than 5,000 email addresses of customers put at risk of being at the receiving end of various SIM-swap attacks against their holdings

An email exchange made back in March of 2019, which Vice cited, allegedly detailed an incident that regarded the disciplining of an employee. This disciplining was due to the employee disabling code within the exchange that drove internal activity, as the employee didn’t want to stoke the fire of the Ontario Securities Commission, or OSC.

Explicit Orders To Lessen Paper Trails

Cole himself responded to the individual, admonishing the employee of holding no consideration of the “massive change” this could incur. The change would come as a result of the perceived liquidity the exchange holds being far less without the wash-trading. Cole then explicitly ordered his employee to turn it back on.

The documents went into detail about how the senior staff at Coinsquare took great steps in order to crack down on the use of the term “wash-trading” within the digital communications of their team, citing concerns regarding a paper trail. It should be commented that one really needs to reevaluate your business practices if you’re citing concerns that there might be a paper trail if you call something by its name.

There had been suspicions in regard to the trade volumes of coin square since as early as 2018. Back then, however, it was just a group of users on Reddit that speculated that the exchange volumes on the exchange could have been fake.