According to a set of leaked documents, the Canadian cryptocurrency exchange Coinsquare was practicing wash trading. This is the practice of creating artificial or “fake” positions to prop up the value of the trading volume on the exchange.
Coinsquare Wash Trading Implications
A recent report revealed that a set of leaked emails, files, and slack chats, implicate the Canadian cryptocurrency exchange Coinsquare in wash trading.
Wash trading is a practice where an investor simultaneously sells and buys the same financial instrument with the intention of generating misleading and artificial data. In the case of cryptocurrency exchanges, wash trading is usually intended to prop up the overall trading volume on the platform.
According to the report, the CEO of the exchange, Cole Diamond, urged employees to continue the practice despite some of them being worried about “the reputational risk this posed” to them as professionals.
“He said he didn’t approve, but that he did it because Cole asked him to. […] The decision to continue wash trading was final by Cole.” – an excerpt reads.
Moreover, senior staff members have reportedly asked others to stop using the term “wash trading” in any written correspondence because it could create a problematic paper trail for the exchange.
At the time of this writing, the company hasn’t addressed these allegations publicly.
Wash Trading Has History In The Crypto Field
Unfortunately, cryptocurrency exchanges across the board have long been suspected of this otherwise illegal practice.
As CryptoPotato reported back in 2019, things got a bit out of hand. According to CoinMarketCap – the world’s leading indicator on metrics such as price and volumes, 30% of all Bitcoin Cash (BCH), 66% of all EOS, and 93% of all Litecoin in circulation were traded in less than 24 hours.
Another report indicated that 50% of Bitcoin’s trading volume was subjected to wash trading.
The major benefit of this practice for exchanges is that it props up the overall volumes that it displays to current and potential users. In other words, a cryptocurrency exchange might seem a lot more liquid than it actually is by wash trading larger amounts.