Coinbase: US Regulators Investigate Ethereum Flash Crash

The CFTC investigates the reasons why the ETH was raised from $ 300 to $ 0.10 in a matter of seconds.

The US Commodity Futures Trading Commission (CFTC) is investigating the Ethereum Flash Crash that occurred on June 21st. According to Bloomberg, the regulator sent a request for information to Coinbase on its GDAX institutional exchange platform.

The CFTC would be particularly interested in the use of leveraged trading on the platform, which will be the key point of its investigation. Although highly popular with institutional traders, leveraged trading can lead to greater volatility in the market and higher risk of capital loss, particularly in an environment where volume is limited, as in cryptomonnaies. Last week, Korea banned trade platforms from offering such practices.

The CFTC has not yet commented publicly on this, but Coinbase responded to Bloomberg, essentially confirming the report:

"As a regulated financial institution, Coinbase complies with regulations and cooperates fully with regulators," the company said in an e-mail statement. "After the GDAX event in June 2017, we took proactive steps with a number of regulators, including the CFTC. We also decided to credit all customers affected by this event. We are not aware of any formal investigation. "

Flash Crash Context

On June 21, 2017, a multi-million dollar selling order was placed on the ETH-USD GDAX order book. This resulted in a processing of sales of $ 317.81 to $ 224.48, which resulted in a difference of 29.4%. This skid triggered a chain reaction, triggering about 800 stop loss orders and liquidating leveraged positions, which resulted in a Flash Crash with an Ethereum price falling to $ 0.10 for a few seconds.

After initially announced otherwise, Coinbase said they would reimburse users who lost money.