Coinsquare Exchange Execs to Resign Over Wash Trading Scandal

Jul 22, 2020 at 09:31 UTC

Cole Diamond, CoinSquare CEO (Brady Dale for CoinDesk)

Canada-based crypto trading platform Coinsquare has agreed to settle with the Ontario Securities Commission (OSC) after it was found senior executives told employees to make fake trades on the platform.

Between Q4 2018 and Q1 2019, 90% of Coinsquare’s reported volume was faked in an illegal practice known as wash trading, the OSC said.
As part of the settlement agreement reached Tuesday, Coinsquare admitted that around 840,000 illicit wash trades were conducted on the platform, amounting to a total value of around 590,000 bitcoin (worth almost $5.5 billion at press time).
The agreement also states that CEO Cole Diamond, founder Virgile Rostand and executive Felix Mazer knowingly “authorized, permitted or acquiesced” Coinsquare staff to carry out the wash trading, made misleading statements and sought retribution against a whistleblower seeking to expose the misconduct.
The senior executives have now agreed to resign, with Diamond to pay a $1 million penalty and Rostand $900,000.
The agreement acknowledged that Mazer had already voluntarily paid $50,000 to the commission, having acted as the company’s CCO contrary to the public interest.
Jeff Kehoe, director of the enforcement branch of the OSC, said the case was the first time the commission has taken action against the reprisal of a whistleblower since protections were added to the Ontario securities legislation in 2016.
Diamond and Rostand have also been banned from being registrants, officers or directors of companies or “market participants” for two to three years. Mazer received a one-year ban.
Coinsquare’s investment dealer subsidiary, Coinsquare Capital markets Ltd., which was seeking registry approval with the OSC prior to the investigation, has been ordered to put in place major governance improvements, including an internal whistleblower program.
Coinsquare, Diamond and Rostand must further pay a total of $300,000 for costs associated with the OSC’s investigation.
The OSC first accused the firm of illegal activities on Monday.

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