Coinbase Fined $6.5 Million For Misleading Reports In The Past

Coinbase, the largest crypto exchange company has been fined the sum of $6.5 million by the Commodity Futures Trading Commission, an independent agency created to protect public users from fraud relating to financial exchange and online trading.

According to a report released by the Commission on Friday, between 2015-2018, Coinbase was guilty of delivering "false, misleading, or inaccurate reports concerning transactions in digital assets."

The company created two programs in its Coinbase Pro, which traded with Bitcoin and Litecoin with each another without disclosing, and included the activities in data shared with external organizations, creating the false impression of more trade volume to traders. 

It was also disclosed that a former employee of the company, used these programs to engage in "wash-trading" between August-September 2016. 

Wash trading is the act of buying and selling financial instruments artificially. It happens when a person places a sell order, then buys said order from themself to create the illusion of market activity.

Although the Trading Commission doesn't directly fault Coinbase, it blames it for recklessness and not being intentional. 

“The settled charges are based largely on conduct that is several years old, has not been repeated, and in the case of the charge of secondary liability, is based on conduct by an employee who left Coinbase years ago and who is not being charged." Dawn Stump, Commissioner of the CFTC said in a report.

A Coinbase spokesperson neither confirmed nor denied the allegations, but reiterates that no Coinbase customers were harmed by these activities.

At the end of 2020, Coinbase had 43 million verified users in total and 2.8 million monthly active users. It has also handled transactions worth about $456 billion since its inception in 2012.

In January, the exchange giant headed by Brian Armstrong announced that it was going public, declaring $114.9 million shares. In a private NASDAQ auction, the company's shares traded between $350 and $375, according to Bloomberg reports, showing a pre-IPO company value of close to $100 billion. The company however opted to go public through a direct listing, rather than an initial public offering. This means only existing shares will be up for purchase on the market, as opposed to creating brand new shares.