Recent media reports suggest that Cole Diamond, CEO of Canadian crypto exchange Coinsquare, has been accused of executing unethical methods to draw investors’ attention. The company tried to inflate the value their investors put in by using a technique known as “wash trading.”
Wash trading is not a new term. It was first mentioned in the article “The New Market Manipulation,” published by Temple University, Philadelphia, in a popular journal. The report came out in public when several vital documents, slack chats, and emails got leaked. The practice of “wash trading” is quite popular in other industries.
Online shopping, real estate market, internet casinos, online food delivery services, and several others have fake accounts, place bids, write reviews, and make infomercials for them. Wash trading is relevant to the trading world, but similar tactics can be applied elsewhere.
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A popular crypto magazine @Tokenn_coin stated “Coinsquare is alleged to be practicing wash trading. This is when employees are ordered to create fake trades to inflate the trading volume. CEO of Coinsquare, Cole Diamond, urged employees to continue the practice despite the reputation risk.”
@blockchain_tim writes “I don’t think there are regulations in place yet. But it certainly damages reputation.”
@Marki_Yunus shared his opinion by saying “I think a lot of companies are doing this, where employees are urged to do this kind of reputation risk.”
According to reports published by a popular media outlet Vice, the CEO, Cole Diamond, ordered one of his employees to turn the wash trading back on. The employee had stopped in fear of getting in trouble with the Ontario Securities Commission. The text message “Turn it back on” was leaked from a Slack (a remote work app) chat.
Amid resistance from Coinsquare employees, Cole continues to pressurize them to carry on the wash trading. Reports also suggest that Cole has performed such an operation back in 2018 and 2019 as well. Investors from all around the world had noticed the inconsistency in the trading activity in 2018. But no action was taken against the crypto firm.
In 2019, a Reddit user shared his opinions on the inconsistency in the trading hours. The user (name, masked) informed the r/BitcoinCA community about business hours of the wealth OTC trading desk according to the EST (Eastern Standard Time), but there was very little activity in this period. The large off-order book transactions took place on weekends and nights.
Since the news of Coinsquare faking their exchange numbers came out in 2019, investors have been pressing the Ontario Securities Commission to run an inquiry. A year ago, rumors circulated within the crypto community, but no solid proof was made available. Company emails, slack chats, or printed documents would have made the OSC act quicker.