UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

In the Matter of: 

COINBASE INC., 

Respondent.

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CFTC Docket No. 21-03

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (d) OF THE COMMODITY EXCHANGE ACT, MAKING 

FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I. INTRODUCTION

The Commodity Futures Trading Commission (“Commission”) has reason to believe that 

from January 2015 to September 2018, Respondent Coinbase Inc. (hereinafter “Respondent” or 

“Coinbase”) violated Section 6(c)(1)(A) of the Commodity Exchange Act (“Act”), 7 U.S.C. 

§ 9(1)(A) (2018), and Regulation 180.1(a)(4), 17 C.F.R. § 180.1(a)(4) (2020), and in addition is

liable as a principal for conduct of an agent employee from August to September 2016 which

independently violated Section 6(c)(1) of the Act and Regulation 180.1(a)(1). Therefore, the

Commission deems it appropriate and in the public interest that public administrative

proceedings be, and hereby are, instituted to determine whether Respondent engaged in the

violations set forth herein and to determine whether any order should be issued imposing

remedial sanctions.

In anticipation of the institution of an administrative proceeding, Respondent has 

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, Respondent consents to 

the entry of this Order Instituting Proceedings Pursuant to Section 6(c) and (d) of the Commodity 

Exchange Act, Making Findings, and Imposing Remedial Sanctions (“Order”), and 

acknowledges service of this Order.1

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 Respondent consents to the use of the findings of fact and conclusions of law in this Order in this 

proceeding and in any other proceeding brought by the Commission or to which the Commission is a 

party or claimant, and agrees that they shall be taken as true and correct and be given preclusive effect 

therein, without further proof. Respondent does not consent, however, to the use of this Order, or the 

findings or conclusions herein, as the sole basis for any other proceeding brought by the Commission or 

to which the Commission is a party or claimant, other than: a proceeding in bankruptcy or receivership; 
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II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

Between January 2015 and September 2018, Coinbase violated Section 6(c)(1)(A) of the 

Act, 7 U.S.C. § 9(1)(A) (2018), and Regulation 180.1(a)(4), 17 C.F.R. § 180.1(a)(4) (2020), by 

recklessly delivering false, misleading or inaccurate reports concerning transactions in digital 

assets, including Bitcoin, on the electronic trading platform it operated, GDAX. During this 

period, Coinbase operated at least two trading programs which generated orders that, at times, 

matched with one another. Coinbase included the transactional information for these 

transactions, such as price and volume data, on its website and provided that information to 

reporting services, either directly or through access to its website, resulting in a perceived 

volume and level of liquidity of digital assets, including Bitcoin, on GDAX that was false, 

misleading or inaccurate. 

Additionally, between August and September 2016, a former Coinbase employee 

(“Employee A”) intentionally placed buy and sell orders in the Litecoin/Bitcoin trading pair on 

GDAX, which he intended to match with one another and result in no loss or gain while creating 

the appearance of liquidity and trading interest in Litecoin. Ultimately, the transactions resulted 

in wash transactions that depicted a misleading picture of the Litecoin/Bitcoin market. 

By knowingly engaging in these wash transactions, Employee A employed a 

manipulative or deceptive device in violation of Section 6(c)(1) of the Act, and Regulation 

180.1(a)(1). Coinbase is vicariously liable as a principal for its agent employee’s conduct 

pursuant to Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B) (2018), and Regulation 1.2, 

17 C.F.R. § 1.2 (2020). 

B. RESPONDENT 

Defendant Coinbase Inc. is a digital asset company founded in 2012 that is based in San 

Francisco, CA. Coinbase operates a brokerage business in which it buys and sells digital assets 

directly from and to the public. Coinbase also owned and operated an online digital exchange 

(“Global Digital Asset Exchange” or “GDAX”) during the relevant periods, where participants 

could buy and sell digital currencies directly from or to other trading participants on a trading 

platform which operated as a price-time priority digital order book. Coinbase is not registered 

with the Commission. 

 

or a proceeding to enforce the terms of this Order. Respondent does not consent to the use of the Offer or 

this Order, or the findings or conclusions in this Order, by any other party in any other proceeding.
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C. FACTS

1. Coinbase Operated Multiple Trading Programs 

Between January 2015 and September 2018, Coinbase operated two automated trading 

programs on GDAX—one that was called the “Hedger” and another that was called the 

“Replicator”. Despite their independent purposes, in practice these programs, at times, matched 

orders with one another in certain trading pairs, resulting in trades between accounts owned by 

Coinbase. The GDAX Trading Rules specifically disclosed that Coinbase was trading on 

GDAX, but omitted that Coinbase was operating more than one trading program and that it was 

trading through more than one trading account. The Hedger operated to maintain a sufficient 

inventory for Coinbase’s brokerage business by periodically buying or selling digital assets on 

GDAX in response to net consumer brokerage demand. The Replicator operated to maintain 

liquidity on GDAX and was programmed to replicate third-party orders by market participants in 

relatively liquid “source” books and then replicate those orders into less liquid “destination” 

books. 

2. Coinbase Reported Transactions Resulting from Matches Between Hedger and 

Replicator 

During this period, Coinbase reported Bitcoin and other digital asset transaction volume 

and price information, both as the transactions occurred in real time and as part of aggregated 

totals for the previous twenty-four-hour period on its Coinbase corporate website and either 

directly or indirectly to reporting services. The reported information included third party market 

participant transactions as well as certain Coinbase transactions resulting from the matches 

between Hedger and Replicator. 

Reporting firms, such as Crypto Facilities Ltd., which publishes the CME Bitcoin Real 

Time Index, and CoinMarketCap OpCo, LLC, which posts such transactional information on its 

website, received access to Coinbase’s transactional information via Coinbase’s Application 

Programming Interface (“API”), or in the case of the NYSE Bitcoin Index, received it directly in 

transmissions from Coinbase. Transactional information of this type is used by market 

participants for price discovery related to trading or owning digital assets. As a result of 

Coinbase recklessly reporting the transactions that resulted from its programs matching orders 

with one another, Coinbase reported false, misleading or inaccurate market information about the 

volume and liquidity of trading on GDAX. 

3. Coinbase “Employee A” Engaged in Wash Trades in the Litecoin/Bitcoin Trading 

Pair 

Over a period of six weeks between August and September 2016, former Coinbase 

“Employee A” employed a manipulative and deceptive device by intentionally engaging in wash 

sales in Litecoin/Bitcoin trading pairs on GDAX between trading accounts associated with his 

own personal email addresses, that he personally owned and controlled. This created the 

appearance of trading interest in the Litecoin/Bitcoin trading pair during the first two months the 

contract was listed on GDAX. Through these wash trades, Employee A sought to create a 
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perception of increased liquidity and to make it appear that the trading pair was successfully 

trading on GDAX. 

On some days, Employee A’s wash trades in the Litecoin/Bitcoin trading pair between 

accounts he owned and controlled, made up a substantial percentage of the trading volume in the 

contract, ranging from as little as 0.62% to as much as 99.0% of the daily trading volume. 

III. LEGAL DISCUSSION 

A. By Recklessly Reporting False, Misleading or Inaccurate Transaction Information, 

Coinbase Violated Section 6(c)(1)(A) of the Act and Regulation 180.1(a)(4)

Taken together, Section 6(c)(1)(A) of the Act, 7 U.S.C. § 9(1)(A) (2018), and Regulation 

180.1(a)(4), 17 C.F.R. § 180.1(a)(4) (2020), prohibit “delivering, or causing to be delivered for 

transmission through the mails or interstate commerce, by any means of communication whatsoever, a 

false or misleading or inaccurate report concerning crop or market information or conditions that affect 

or tend to affect the price of any commodity in interstate commerce, knowing or acting in reckless 

disregard of the fact that such report is false, misleading or inaccurate.” Respondent violated Section 

6(c)(1)(A) and Regulation 180.1(a)(4) when it recklessly delivered or caused to be delivered false, 

misleading, or inaccurate transaction information that included transactions between accounts it owned 

and controlled. Transaction information affects or tends to affect the price of digital assets, including 

Bitcoin, which is a commodity in interstate commerce.2 

B. Coinbase is Vicariously Liable as Principal, pursuant to Section 2(a)(1)(B) and 

Regulation 1.2, for its Agent Employee’s Conduct Which Violated Section 6(c)(1) 

and Regulation § 180.1(a)(1) 

Section 6(c)(1) and Regulation 180.1(a)(1) prohibit the use or employment of a manipulative or 

deceptive device or contrivance in connection with a contract of sale of a commodity in interstate 

commerce. Employee A’s placement of orders which were intended to match with one another 

constituted “wash trading” or “a simultaneous purchase and sale designed to negate each other so that 

there is no change in financial position.” Reddy v. CFTC, 191 F.3d 109, 115 (2d Cir. 1999). This wash 

trading violated Section 6(c)(1) and Regulation 180.1(a)(1). See In re: Natural Gas Commodity Lit., 

337 F.Supp.2d 498, 504 (S.D.N.Y. 2004) (“Wash trading can create a false impression of greater 

trading activity and thus greater liquidity for a given item.”). Respondent is vicariously liable for 

this conduct because Employee A undertook these actions within the scope of his employment.3

 

2

 Bitcoin is encompassed within the broad definition of “commodity” under Section 1a(9) of the Act, 

7 U.S.C. § 1a(9) (2018), and is therefore subject to applicable provisions of the Act and Regulations, 

which includes Section 6(c)(1) of the Act and Regulation 180.1(a). See, e.g., CFTC v. My Big Coin Pay, 

Inc., 334 F. Supp. 3d 492, 498 (D. Mass. 2018) (“Here, the amended complaint alleges that My Big Coin 

is a virtual currency and it is undisputed that there is futures trading in virtual currencies (specifically 

involving Bitcoin). That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big 

Coin is a ‘commodity’ under the Act.”); CFTC v. McDonnell, 287 F. Supp. 3d 213, 226 (E.D.N.Y 2018) 

(“Virtual currencies can be regulated by CFTC as a commodity.”), mot. for reconsideration denied, 321 

F. Supp. 3d 366 (E.D.N.Y. 2018). 

3

 Under Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B) (2018) and Regulation 1.2, 17 C.F.R. § 1.2 

(2020), the act, omission, or failure of any official, agent, or other person acting for any individual, 
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IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that, during the relevant periods, Coinbase 

violated Section 6(c)(1)(A) of the Act, 7 U.S.C. § 9(1)(A) (2018), and Regulation § 180.1(a)(4), 

17 C.F.R. § 180.1(a)(4) (2020), and was vicariously liable pursuant to Section 2(a)(1)(B) of the 

Act, 7 U.S.C. § 2(a)(1)(B) (2018), and Regulation 1.2, 17 C.F.R. § 1.2 (2020), as a principal for 

its agent employee’s conduct which violated Section 6(c)(1) of the Act, 7 U.S.C. § 9(c)(1) (2018) 

and Regulation 180.1(a)(1), 17 C.F.R. § 180.1(a)(1) (2020). 

V. OFFER OF SETTLEMENT 

Respondent has submitted the Offer in which it, without admitting or denying the 

findings and conclusions herein: 

A. Acknowledges service of this Order; 

B. Admits the jurisdiction of the Commission with respect to all matters set forth in this 

Order and for any action or proceeding brought or authorized by the Commission based 

on violation of or enforcement of this Order; 

C. Waives: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission’s 

staff in the Commission’s consideration of the Offer; 

6. Any and all claims that it may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504 (2018), and 28 U.S.C. § 2412 (2018), and/or the rules promulgated 

by the Commission in conformity therewith, Part 148 of the Regulations, 17 C.F.R. 

pt. 148 (2019), relating to, or arising from, this proceeding; 

7. Any and all claims that it may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, tit. II, §§ 201–253, 110 

Stat. 847, 857–74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

 

association, partnership, corporation, or trust within the scope of his employment or office shall be 

deemed the act, omission, or failure of such individual, association, partnership, corporation, or trust. 
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sections of 5 U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; 

and 

8. Any claims of Double Jeopardy based on the institution of this proceeding or the 

entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order. 

D. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Respondent has consented in the Offer; 

E. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

1. Makes findings by the Commission that Respondent violated Section 6(c)(1)(A) of 

the Act, 7 U.S.C. § 9(1)(A) (2018), and Regulation 180.1(a)(4), 17 C.F.R. 

§ 180.1(a)(4) (2020), and was vicariously liable pursuant to Section 2(a)(1)(B) of 

the Act, 7 U.S.C. § 2(a)(1)(B) (2018), and Regulation 1.2, 17 C.F.R. § 1.2 (2020) 

as a principal for its agent employee’s conduct which violated Section 6(c)(1) of 

the Act and Regulation 180.1(a)(1); 

2. Orders Respondents to cease and desist from violating Section 6(c)(1)(A) of the 

Act and Regulation 180.1(a)(4); 

3. Orders Respondent to pay a civil monetary penalty in the amount of six million, 

five hundred dollars ($6,500,000), plus any post-judgment interest within ten days 

of the date of entry of this Order; and 

4. Orders Respondent and its successors and assigns to comply with the conditions 

and undertakings consented to in the Offer and as set forth in Part VI of this Order. 

Upon consideration, the Commission has determined to accept the Offer. 

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

1. Respondent and its successors and assigns shall cease and desist from violating Section 

6(c)(1)(A) of the Act, 7 U.S.C. § 9(1)(A) (2018), and Regulation 180.1(a)(4), 17 C.F.R. 

§ 180.1(a)(4) (2020). 

2. Respondent shall pay a civil monetary penalty in the amount of six million, five hundred 

thousand dollars ($6,500,000) (the “CMP Obligation”), within ten days of the date of the 

entry of this Order. If the CMP Obligation is not paid in full within ten days of the date 

of entry of this Order, then post-judgment interest shall accrue on the CMP Obligation 

beginning on the date of entry of this Order and shall be determined by using the 

Treasury Bill rate prevailing on the date of entry of this Order pursuant to 28 U.S.C. 

§ 1961 (2018). 
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Respondent shall pay the CMP Obligation and any post-judgment interest by electronic 

funds transfer, U.S. postal money order, certified check, bank cashier’s check, or bank 

money order. If payment is to be made other than by electronic funds transfer, then the 

payment shall be made payable to the Commodity Futures Trading Commission and sent 

to the address below:

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 181 

Oklahoma City, OK 73169 

(405) 954-6569 office 

(405) 954-1620 fax 

9-AMC-AR-CFTC@faa.gov 

If payment is to be made by electronic funds transfer, Respondent shall contact Marie 

Thorne or her successor at the above address to receive payment instructions and shall 

fully comply with those instructions. Respondent shall accompany payment of the CMP 

Obligation with a cover letter that identifies the paying Respondent and the name and 

docket number of this proceeding. The paying Respondent shall simultaneously transmit 

copies of the cover letter and the form of payment to the Chief Financial Officer, 

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, 

Washington, D.C. 20581. 

3. Respondent and its successors and assigns shall comply with the following conditions 

and undertakings set forth in the Offer: 

1. Public Statements: Respondent agrees that neither it nor any of its successors and 

assigns, agents or employees under its authority or control shall take any action or 

make any public statement denying, directly or indirectly, any findings or 

conclusions in this Order or creating, or tending to create, the impression that this 

Order is without a factual basis; provided, however, that nothing in this provision 

shall affect Respondent’s: (i) testimonial obligations; or (ii) right to take legal 

positions in other proceedings to which the Commission is not a party. 

Respondent and its successors and assigns shall comply with this agreement, and 

shall undertake all steps necessary to ensure that all of its agents and/or 

employees under its authority or control understand and comply with this 

agreement. 

2. Cooperation, in General: Respondent shall cooperate fully and expeditiously with 

the Commission, including the Commission’s Division of Enforcement, in this 

action, and in any current or future Commission investigation or action related 

thereto. Respondent shall also cooperate in any investigation, civil litigation, or 

administrative matter related to, or arising from, this action. 
3. Partial Satisfaction: Respondent understands and agrees that any acceptance by 

the Commission of any partial payment of Respondent's Restitution Obligation, 

Disgorgement Obligation, or CMP Obligation shall not be deemed a waiver of its 

obligation to make further payments pursuant to this Order, or a waiver of the 

Commission's right to seek to compel payment of any remaining balance. 

4. Change of Address/Phone: Until such time as Respondent satisfies in full its CMP 

Obligation as set forth in this Consent Order, Respondent shall provide written 

notice to the Commission by certified mail of any change to its telephone number 

and mailing address within ten calendar days of the change. 

The provisions of this Order shall be effective as of this date. 

By the Commission. 

C1bJA.t~-

Christopher J. Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: March 19, 2021 

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