Coinbase fined $6.5 million by CFTC for wash trading, FTX founder says this could be a positive development
The U.S. exchange Coinbase has been striving to maintain a positive image before its official listing, but encountered some issues. The U.S. Commodity Futures Trading Commission (CFTC) issued a notice on the 19th, demanding that Coinbase pay a $6.5 million fine for providing false, misleading, and inaccurate information, as well as wash trading.
However, FTX founder SBF believes this may also be a positive development. Why?
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Why was Coinbase fined by CFTC?
CFTC stated that between January 2015 and September 2018, Coinbase provided false, misleading, and inaccurate information on its GDAX trading platform. During this period, Coinbase operated two automated trading programs: Hedger and Replicator, where one program placed orders while the other matched them. CFTC mentioned that although Coinbase disclosed trading on GDAX, it did not disclose that Coinbase operated more than one trading program through multiple accounts. Furthermore, these two bots would match trades on specific trading pairs and execute transactions between accounts owned by Coinbase.
CFTC believes that Coinbase provided this trade information to its website and other information websites such as CME Bitcoin Real Time Index and CoinMarketCap. This information is used by market participants to trade or decide on holding digital assets, hence Coinbase may be suspected of engaging in fraudulent trading volume and depth.
CFTC also found that from August to September 2016, for about six weeks, former employees of Coinbase used manipulative or deceptive devices to wash trading volume in the Litecoin/Bitcoin trading pair on GDAX, leading to misjudgments regarding Litecoin. CFTC holds Coinbase responsible for the actions of these employees.
However, FTX founder SBF sees this as a positive development. Why?
SBF: Good for Coinbase
FTX founder SBF mentioned that although this may seem bad on the surface, it's not that serious, and CFTC's way of releasing the news is not to incite war but to announce results after things settle down.
He believes that Coinbase has a lot to do before going public, including resolving conflicts with all enforcement agencies. They just completed one task. Moreover, the details of the Hedger and Replicator trading programs were not disclosed at all. SBF thinks Coinbase should be satisfied with this outcome.
However, SBF still imagines that Hedger and Replicator are bots used to provide market liquidity.
1) The CFTC fines Coinbase $6.5m.
This might be bullish for Coinbase.https://t.co/LIYr9WK6dg
— SBF (@SBF_FTX) March 20, 2021
On the 20th, Coinbase also released a new series of videos, hoping to provide investors with a more transparent understanding of Coinbase:
We've posted our investor education videos: https://t.co/0mL2plbMrJ
— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 19, 2021
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