CFTC Sanctions Bitcoin Swap Platform over Fictitious Trading


The CFTC Settles case with Coinflip, Calls Bitcoin a Commodity — A Bitcoin trading platform has been sanctioned by US regulators for committing wash trades, while becoming yet another digital currency firm to have faced the wrath of growing crackdowns on unlawful trading actives.

The action against TeraExchange, a provisionally registered exchange, is followed by the Securities and Exchange Commission’s (SEC) $20,000 penalty against Sand Hill Exchange, and the very recent move against CoinFlip, ordered by the Commodity Futures Trading Commission (CFTC). Interestingly, CFTC has also declared Bitcoin as a commodity, which subjects the digital currency to directives contained in Commodity Exchange Act.

The matter against TeraExchange, however, has a little to do with Bitcoin’s status as a commodity. According to the available reports, the trading platform had arranged two investors to take part in two offsetting trades “to test the pipes by doing a round-trip trade with the same price in, same price out.”

However, the test trades were lately publicized as actual trades, a move that went against the existing standards of CFTC that doesn’t allow a provisionally licensed company (sef) to pre-arrange trades like this. In fact, TeraExchange’s own terms and condition prohibits such activities.

“These facts,” the CFTC stated, “should be distinguished from a situation where a sef or other designated contract market runs pre-operational test trades to confirm that its systems are technically capable of executing transactions and, to the extent that these simulated transactions become publicly known, makes it clear to the public that the trades do not represent actual liquidity in the subject market.”

The US regulator, however, didn’t impose any penalty on TeraExchange.