Coinbase denies The Wall Street Journal’s proprietary trading allegations

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Coin­base has denied alle­ga­tions from The Wall Street Jour­nal that it engaged in pro­pri­etary trading.

The exchange said Sept. 22 that the WSJ  had con­fused its client-dri­ven activ­i­ties with pro­pri­etary trading.

Proprietary trading allegation

The Jour­nal report­ed ear­li­er on Sept. 22 that Coin­base cre­at­ed a trad­ing group that used $100 mil­lion of the com­pa­ny funds to trade cryptocurrencies.

Accord­ing to the report, the exchange test­ed the effec­tive­ness of its pro­pri­etary trad­ing, and peo­ple famil­iar with the prod­uct claimed the exchange made profits.

Coin­base raised funds using a struc­tured note sold to the invest­ment firm, Invesco Ltd. Offi­cial sources at Invesco con­firmed the deal.

Wall Street report­ed that Coin­base recruit­ed at least four senior Wall Street traders for the Coin­base Risk Solu­tions group, which used the company’s fund to trade, stake, and lock up cryptocurrencies.

Peo­ple famil­iar with the mat­ter insist­ed that the Risks Solu­tion Unit was trad­ing for clients and using Coinbase’s cash.

Coin­base key exec­u­tives like the Chief Finan­cial Offi­cer Ale­sia Haas and head of insti­tu­tion­al sales, trad­ing, cus­tody, and prime ser­vices, Brett Tej­paul, were report­ed­ly involved in the cre­ation of the unit.

Coinbase denies allegations

Coin­base pub­lished a blog post where it out­right denied the allegations.

Accord­ing to the post, Coin­base does not do “a pro­pri­etary trad­ing busi­ness or act as a mar­ket maker.”

The firm said that its Coin­base Risk Solu­tions is designed to help insti­tu­tion­al investors seek­ing cryp­to expo­sure. The firm stat­ed that the goal of this team is to expand insti­tu­tion­al par­tic­i­pa­tion in web3 beyond Hodling.

A Coin­base spokes­woman told WSJ:

“Coin­base does not, and has nev­er, had a pro­pri­etary trad­ing busi­ness. Any insin­u­a­tion that we mis­led Con­gress is a will­ful mis­rep­re­sen­ta­tion of the facts. Coin­base Risk Solu­tions was estab­lished to facil­i­tate client-dri­ven cryp­to transactions.”

Coin­base exec­u­tives had denied that it car­ried out pro­pri­etary trad­ing when they appeared before Con­gress last year.

While there are no restric­tions on Coin­base from engag­ing in spec­u­la­tive trad­ing, there are con­cerns about the risks.

There is the pos­si­bil­i­ty of con­flict of inter­est and mar­ket manip­u­la­tion when a finan­cial firm invests its funds and clients’ mon­ey in the market.

Post­ed In: Coin­base, Trad­ing

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