A Major Milestone for Regulatory Enforcement
In a significant development, the Ontario Securities Commission (OSC) has approved a settlement agreement with cryptocurrency platform Coinsquare, following allegations of market manipulation, making misleading statements to investors, and taking reprisal against an internal whistleblower. The settlement terms include executive departures and financial penalties totaling over $2 million.
Background on the Allegations
Coinsquare was accused of engaging in market manipulation by reporting inflated trading volumes, which were later found to be approximately 840,000 wash trades between July 17, 2018, and December 4, 2019. These trades represented an estimated 590,000 bitcoins and accounted for over 90% of the reported trading volume on its platform.
The OSC’s Findings
The regulator stated that these trades were created to inflate the trading volumes reported on the platform and had no economic substance. Furthermore, Coinsquare admitted to making misleading statements to conceal the wash trades when clients and members of the public raised questions about the suspicious trading volumes.
Penalties and Consequences for Coinsquare Executives
As part of the settlement agreement, chief executive Cole Diamond and president Virgile Rostand agreed to resign from their positions. They will also pay administrative penalties of $1 million and $900,000, respectively, as well as $300,000 towards the cost of the commission’s investigation.
The Significance of this Settlement
This case marks an important milestone for regulatory enforcement in Ontario. It is the first time the OSC has taken action against a company for reprisal against a whistleblower since protections were added to securities regulation in 2016.
Corporate Governance Improvements Required by Coinsquare
Under terms of the settlement agreement, Coinsquare and its subsidiary must implement substantial corporate governance improvements, including:
- Setting up independent boards of directors
- Appointing new CEOs and chief compliance officers
- Creating an internal whistleblower program
- Implementing policies and procedures to monitor and assess compliance with Ontario securities laws
Next Steps for Coinsquare
Once these improvements are implemented, the firm and its subsidiary will be able to resubmit complete and updated applications for registration to the OSC and the Investment Industry Regulatory Organization of Canada.
Conclusion
This settlement agreement highlights the importance of regulatory enforcement in protecting investors and maintaining market integrity. It also underscores the need for companies to prioritize corporate governance and transparency.
Sources:
- Ontario Securities Commission (OSC)
- Coinsquare
- Investment Industry Regulatory Organization of Canada (IIROC)
