Coinbase to Pay $6.5 Million to Settle CFTC Investigation Over Trading

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WASHINGTON—Cryptocurrency exchange operator Coinbase Inc. agreed Friday to pay $6.5 million to settle regulatory claims that it reported misleading information about its trading volumes.

Coinbase, which last year filed plans to go public, resolved the Commodity Futures Trading Commission’s investigation without admitting or denying the regulator’s claims. The outcome clears one cloud hanging over Coinbase as it prepares to become a public company through a direct listing on the

Nasdaq Stock Market.

Coinbase said in a statement that the investigation didn’t allege any harm to customers. “We proactively engaged with the CFTC throughout their investigation, and we believe that our conversations were constructive and contributed to an outcome that is satisfactory for both parties,” the company said in the statement.

The enforcement action shows how Wall Street regulators such as the CFTC, which oversees derivatives markets, have moved to police conduct in the new world of cryptocurrencies and digital assets.

The CFTC has asserted its right to police trading in cryptocurrencies, such as bitcoin, that have been deemed to be commodities. The CFTC doesn’t write rules or inspect bitcoin exchanges, as it does for futures and swaps, but it retains authority to intervene when it suspects fraudulent or manipulative activity.

Coinbase, which was founded in 2012 as a platform to trade bitcoin, has 43 million users and serves 7,000 institutional customers, according to the prospectus filed for its direct listing. In such a transaction, companies let their shares float on a stock exchange, enabling them to trade publicly and allowing early investors or employees to sell shares to the public.

The claims against Coinbase date from a period between 2015 and 2018 and relate to trading on an exchange now known as Coinbase Pro. The company operated two programs that generated orders that sometimes traded with each other, the CFTC said in a settlement order.

Coinbase includes those trades in figures it disclosed to services that disseminate volume and price information about bitcoin to the public, the CFTC said. That meant traders could have received a misleading sense of volume on Coinbase Pro, the CFTC said.

The CFTC alleged in the same order that a former Coinbase employee engaged in similar conduct, which the agency deemed to be “wash trading,” a prohibited tactic that involves intentionally submitting buy and sell orders that match, thereby creating a trade, but without a change in ownership of the asset. Wash trading is banned because it creates a misleading appearance of trading volume and can deceive others into believing there is more liquidity than there really is.

(More to come)

Write to Dave Michaels at

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