A bitcoin swap trading TeraExchange faced charges today from the US Commodity Futures Trading Commission (CFTC) on what is being considered illegal wash trade.

The company has not received any special penalty but was ordered to stop violating the Commodity Exchange Act. 

The CFTC said that neither in press releases, nor at public meetings did TeraExchange indicate that the transactions which took place on October, 8, 2014 were pre-arranged wash sales aimed at testing Tera’s system.

The transactions implied a non-deliverable forward contract which the CFTC assessed as an act of trade washing (transactions which only give the appearance that any purchases and sales were made). Such activity can be undertaken by an exchange for the purpose of testing its system, but it must be openly declared, which TeraExchange failed to do. 

"These facts 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." 

For the time being, the CFTC finds it reasonable to warn the company against executing such transactions in the future, without imposing on it any material penalty. 

Earlier the CFTC settled charges against another bitcoin trading platform Coinflip, for the very first time declaring the digital currency to be a commodity.


Maria Rudina