Cole Diamond, CEO of the Canadian crypto exchange Coinsquare, has been accused of washing trading after leaked reports allegedly showed him ordering his employees to counterfeit trading.
Wash trading is the practice of making large domestic transactions to artificially increase the volume of the stock market. This creates the illusion of liquidity and popularity, attracting new customers.
Report last March Bitwise Asset Management found that 95% of trade with Bitcoin falsified. The total volume of FTX shows that 80% of the volume of crypto exchanges is fake.
According to a report by Vice on June 13, this is a practice that Coinsquare knows all too well.
“Turn it back on ,” reads an expiring message received by a deputy. The order, apparently issued in March 2019 (the month in which the household report broke), by Cole to an employee of Coinsquare, states that it refers to the internal trading system of laundry on the stock exchange.
The system is said to have been shut down in preparation for a visit by the Ontario Securities Commission. Wash trading, however, violates Ontario securities law.
Compliance was clearly not one of Cole’s biggest concerns when he learned that an employee had turned off the system.
The wash trading system was apparently re-enabled by the employee.
“[He] said he did not approve, but that he did it because Cole had ordered it,” read a leaked email between Coinsquare employees, the deputy said.
The sudden drop in the volume of the stock market would really look suspicious. This is especially true given the community’s doubts about Coinsquare’s liquidity.
In 2018, Reddit users began to question the validity of Coinsquare’s volume. According to a topic aptly titled “Coinsquare Counterfeit Volume,” one user said the team succumbed to the practice.