Fictitious Trading Spotted on Coinsquare Exchange

Kataryna Kovtun June 16, 2020


Coinsquare’s CEO arranged falsification of trading on the exchange and ordered employees to support fictitious trading.

Cole Diamond, the Canadian cryptocurrency exchange CEO is suspected of organizing fictitious trading. Vice published messages indicating that he ordered exchange employees to falsify trading volumes.

Fictitious trading is the practice of making large internal transactions to artificially increase the volume of trading on the exchange. It creates the illusion of liquidity and popularity of the site, which attracts new customers.

Coinsquare Exchange CEO ordered its employees to support the operation of the fictitious trade mechanism. This information is confirmed by the messages that got to the network, which the head of the exchange wrote to his employees in March last year.

Fictitious Trading is a Violation of the Securities Act.

“Turn it on again,” the report said. The instruction Cole gave Coinsquare to the March 2019 employee appears to apply to the exchange’s fictitious internal trading system.

The system was allegedly shut down in preparation for a visit to the Ontario Securities Commission since fictitious trading is a violation of the Securities Act. However, according to Cole, the CEO did not show much concern regarding regulatory compliance. One of Cole’s posts that month said:

“Whoever did this, he took no steps to ensure that serious changes in the operation of the exchange do not affect the way the site looks to outside observers.”

After this, the fictitious trading system was re-activated by the employee. The publication notes:

“He [the employee] said he did not approve the decision, but activated the system because Cole asked for it. The decision to continue the fictitious trade was made by Cole.”

The sudden drop in trading volume looked suspicious, especially given the community’s doubts about liquidity at Coinsquare. The Coinsquare liquidity issue was first raised in 2018 by Reddit users. According to one of the users under the heading “Coinsquare falsifies trading volumes,” the exchange team has long been seen in fictitious trading.

Market analysts have repeatedly reported the alleged falsification of trade on various cryptocurrency exchanges. Last year, an anonymous group of researchers published a report according to which 88% of the trading volume on cryptocurrency exchanges are artificially created. Last summer, Nomics reported that only 17% of the transactions of the declared trading volume of bitcoin can be considered real.


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