It looks like more trouble is brewing for Coinsquare, the Canadian crypto exchange, after the wash trading allegations that were made by the nation’s regulator against a number of its top officials. In the latest twist for the company, they have now been asked by the Canadian Revenue Agency (CRA) to provide information about its customers. The National Post published a report in which they disclosed that a filing had been made by the CRA in September asking Coinsquare to hand over customer data. The agency is interested in all customer records of Coinsquare and their trading histories that date back to the exchange’s launch in 2013.
It was noted in the report that CRA had requested those records for fighting possible tax fraud. However, it is also believed that the CRA is planning to compare the information found on the files of the exchange with previous tax records. A local tax lawyer named David Piccolo explained that this information could be used by the CRA for tallying with customers’ tax records. As a matter of fact, the agency is also in the position of widening the scope of their oversight to search for organizations and individuals under investigation.
The lawyer elaborated that the CRA could use the information for matching and verifying certain transactions that were reported in the tax filings. Then, they perform an internal risk assessment for determining if pursuing them in an audit is worth it. The problems for Coinsquare began in July, when its executives were formally accused of wash trading by the Ontario Securities and Exchange Commission (OSC). The OSC had accused the exchange in a filing of acting in a way that was in direct contradiction to the Canadian securities law. It added that the entire thing had been spearheaded by several top executives, including CEO Cole Diamond, founder Virgile Rostand and Felix Mazer, the chief compliance officer.
However, it should be noted that OSC’s case against the Canadian exchange is related to activities that happened almost two years ago. According to the accusations, Rostand was ordered by Diamond to inflate the trading numbers back in March 2018. Eventually, a soliton was developed by Rostand that enabled the exchange to follow through on the request. Larger transactions were faked by executing large trades into the firm’s wallets. A total of 840,000 bogus transactions were conducted between July 17th, 2018 and December 4th, 2019. The OSC said that these transactions had an aggregate value of 590,000 Bitcoins.
These numbers are actually 90% of the entire trading volume of the exchange. Still, the CRA wants information about the exchange’s customers from 2013 onwards. Piccolo stated that it was not the first time that such an extensive amount of data had been demanded by the CRA from crypto companies. However, considering that it has around 200,000 users, they could be testing Coinsquare’s ability of processing such large transactions. The CRA seems to be following the same line as the Internal Revenue Service (IRS) in the United States, which had also attempted to get information about the crypto holdings of American citizens.