Coinbase Found Guilty of Engaging in Market Manipulation, Wash Trading and Rigging the General Crypto Markets

Cryptocurrency Exchanges Mar 20, 2021

On March 19th, 2021, the CFTC published a press release on their website revealing that Coinbase, the cryptocurrency exchange, was found guilty of engaging in, "reckless false, misleading, or inaccurate reporting as well as wash trading by a former employee on Coinbase's GDAX platform."

As punishment for Coinbase's nefarious actions, the CFTC announced that Coinbase had been fined a total of $6.5 million and ordered to "cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations, as charged."

The report goes on to state that Coinbase's actions "[undermined] the integrity of digital asset pricing", which - in laymen's terms - is a polite way of stating that Coinbase's actions essentially 'rigged' the markets.

Unpacking the CFTC Haymaker

In many ways, the CFTC's ruling against Coinbase was both surprising and unsurprising.

The surprise was the press release itself since no prior public reports indicated that Coinbase was being investigated by the CFTC for these egregious offenses against the crypto community.

The unsurprising part was the nature of the findings made against Coinbase.

Despite the industry's insistence on treating Coinbase like the 'golden standard' of cryptocurrency exchanges, the exchange has been implicated or outright exposed for their involvement in numerous questionable and/or criminal activities in the blockchain space since their inception.

  1. Below is a Brief [Non-Exhaustive] List of Nefarious Activities and Crimes That Coinbase Has Either Actively Participated in or Facilitated Over the Past Few Years (the clear pattern of malfeasant behavior is clear as day)
  2. In 2015, it was revealed that Coinbase had lied about its regulatory status  - https://www.sfgate.com/business/article/Bitcoin-exchange-claims-it-is-regulated-but-6043584.php
  3. On July 18th, 2018, Coinbase published an announcement informing the cryptocurrency space that it had lied about receiving regulatory approval from the U.S. government to "list coins considered securities" - https://cointelegraph.com/news/coinbase-retracts-announcement-of-regulatory-approval-to-list-coins-considered-securities (Coinbase Retracts Announcement of Regulatory Approval to List Coins Considered Considered Securities)
  4. On June 20th, 2018, Mashable published a bombshell article revealing that scores of complaints had been filed against Coinbase at the SEC and other government agencies alleging fraud, negligent practice, and other general malfeasance - https://mashable.com/article/sec-coinbase-complaints-fraud/#u2K.mnDD3iqU (Customers turn to SEC w litany of complaints against Coinbase for their actions and practices)
  5. On July 2nd, 2018, it was revealed that Coinbase's broker had been censured and fined by the SEC for lying to their investors and the general public about their use of customer funds - https://blog.zerononcense.com/2018/07/02/coinbases-broker-was-censured-and-fined-by-the-sec-for-using-customer-funds-for-personal-gain/ (Coinbase's Broker Was Censured and Fined by the SEC for Using Customer Funds for Personal Gain)
  6. In June 2016, a bombshell Reddit post exposed numerous half-truths and opaque background associations related to Coinbase and Circle - https://www.reddit.com/r/Bitcoin/comments/4md665/coinbase_may_have_lied_about_the_number_of/ (Multiple high ranking individuals among the Bitcoin community point out the fact that Circle + Coinbase are far from transparent in the community )
  7. On March 6th, 2018, Coinbase was sued by investors for their nefarious, surprise Bitcoin Cash listing (which they promptly stopped trading for almost immediately after its listing on the exchange) - https://www.cnbc.com/2018/03/06/bitcoin-cash-rollout-cost-investors-5-million-lawsuit-says.html (Lawsuit filed against Coinbase alleging that their rollout of Bitcoin Cash had cost investors approximately $5 million)
  8. On June 5th, 2018, scores of investors filed suit in the Northern District of San Francisco, alleging gross negligence on Coinbase's part due to the failure on their part to prevent the owner of the now-defunct crypto exchange, Cryptsy, from cashing out funds he had absconded from exchange users in an extravagant exit scam involved him fleeing the country shortly after - https://www.coindesk.com/judge-reopens-cryptsy-customer-class-action-against-coinbase/ (Cryptsy + Coinbase lawsuit reopened against Coinbase after consumers claimed that it was Coinbase's responsibility to stop Cryptsy from laundering their funds through its exchanges + South Florida judge denies Coinbase's argument that the binding arbitration clauses prohibit customers from filing such a lawsuit)
  9. Most recently [December 2020], the New York Times published a bombshell report detailing Coinbase's flagrantly racist and sexist employment practices in explicit detail - going as far as providing explicit details on which employees were underpaid and by how much (the report concluded that Coinbase had underpaid its black employees by >10%, relative to white employees working at the company in the exact same role as said black employees) = https://www.nytimes.com/2020/12/29/technology/coinbase-pay-employees.html
  10. In 2018, the New York OAG Published a Comprehensive Report on Various Exchanges in the Crypto Space ; In the OAG's Report They Exposed the Fact That Coinbase Was Counter Trading Against Their Own Users (among other nefarious market practices) = https://www.coindesk.com/coinbase-disputes-claims-in-new-york-attorney-generals-exchange-report

Coinbase Must Be Considered a Bad Actor at This Point

The incidents listed above involving Coinbase are far from exhaustive, and each one is as egregious if not even more so than the other.

The pattern of nefarious activity by Coinbase also spans back several years as well. A few of the criminal / unethical incidents listed above that Coinbase was involved / engaged in occurred all the way back in 2015.

Which means that Coinbase has been behaving as a bad actor in the blockchain space for well over 6 years.

What Should You Do If You Have an Account With Coinbase?

Consider moving all of your crypto off of the exchange and requesting them to close your account, immediately - unless you feel comfortable leaving your funds in the hands of proven market manipulators and criminals.
'Isn't That a Bit of an Overreaction?'

That's up to you, the reader, to decide.

At the end of the day, you - as a reader - are capable of making your own decisions. Librehash simply promotes the philosophy that end users in the blockchain space should put their own interests and financial security ahead of that of centralized, 3rd-party middleman services like Coinbase that were never conceived as part of the 'original vision of Bitcoin' (which entities like Coinbase claim to care so much about).

Calling Out Coinbase's Activities For What They Are

End users in the blockchain space should be offended by Coinbase's actions.

The CFTC's findings help establish a few critical points:

  1. Coinbase frontruns users on their own exchange. To put that in laymen's terms, if you are/were a trader using Coinbase's platform to manage your portfolio, scalp, day trade, etc., then they ensured that you came out behind with a loss - regardless of how smart your investment strategy was.
  2. Ever noticed how Coinbase always seems to have an "outage" whenever the price of Bitcoin, Litecoin, or some other asset on its exchange is experiencing significant price action? Chances are, they weren't experiencing any 'outage' at all, but rather pretending they were so that they could prevent you (the end user) from moving your funds or engaging in a trade at opportune times (since you winning = them losing)
  3. Have you ever been forced to verify your identity to move your funds off of Coinbase when you could've sworn that you already underwent the verification process? Surprise. That probably wasn't a mistake on their part. They just needed a reason to stall your withdrawal because they either: a) didn't have the necessary funds on-hand to give you [tied up in other investments] or b) bullshitted you until they decided that it would be a more 'opportune' time to allow you to move your funds off of the exchange

Coinbase Betrayed the Trust of the Entire Crypto Space

Many will let Coinbase off the hook (undoubtedly due, in some part, to manufactured consent on social media generated by crypto 'influencers' whom are more than likely paid under the table by Coinbase to be their informal PR agents). But for those that are independent thinkers that don't like the idea of being lied to, conned, and robbed - your fury is understandable.

Conclusion - Class Action in the Woodwork?

While it is widely known that Coinbase forces all of its users to agree to Terms and Conditions that stipulate binding arbitration, there may be exceptions granted in instances where the counterparty has been accused / found guilty of outright fraud / crime of some sort.

Notably, in the Cryptsy case, the U.S. Court of Appeals for the Eleventh Circuit ruled that Coinbase's binding arbitration clause did not apply because the "plaintiff's allegations were based not on the user agreement at issue but on violations of federal statutes and regulations such as the Bank Secrecy Act (BSA)."

End result? "The Eleventh Circuit affirmed dismissal of the defendant's motion to compel arbitration."

For those interested, the entire docket for the litigious action against Coinbase can be found here = https://www.courtlistener.com/docket/4572172/leidel-v-coinbase-inc/ (spoiler alert: they lost and were forced to pay the Cryptsy victims that had their money stolen by the owner of the exchange whom Coinbase allowed to launder said stolen funds)

Final Word

There's a lot that can be said about Coinbase, but also nothing at all too if you're anything like the author and find yourself utterly shocked, disgusted and speechless at Coinbase's subverse, criminal and nefarious activity in the blockchain space.

Unfortunately for end users in the crypto space, Coinbase is still in operation - so the looming danger and threat of becoming a victim of the exchange's insidious, predatory deceitful and unethical practices remains as ever present as it was before.

Stay safe, friends.

Tags

cryptomedication

Happy to serve and help wherever I'm needed in the blockchain space. #Education #EthicalContent #BringingLibretotheForefront

Great! You've successfully subscribed.
Great! Next, complete checkout for full access.
Welcome back! You've successfully signed in.
Success! Your account is fully activated, you now have access to all content.