The Prosecutor General's Office of New York state has published a report about cryptocurrency trading platforms, which indicated their vulnerability to market manipulation. In addition, the Procuracy has passed an information on several exchanges to other agencies because of potential law violation.
The Procuracy launched an investigation in April of this year. Thirteen of the largest cryptocurrency exchanges, including Coinbase, Binance, Kraken, Bittrex and Bitfinex were invited to answer questions about their activities voluntarily. Although some platforms refused to cooperate, and the state's General Prosecutor Eric Schneiderman resigned in May, an investigation was ongoing.
A report entitled "Virtual Markets Integrity Initiative" is devoted to practices of cryptocurrency markets, including their methods of monitoring and prevention of manipulations on market.
According to authors of report, several cryptocurrency exchanges have admitted themselves to be unable to monitor and prevent manipulation, and limit of their capacity is monitoring abuses. The report also said, that stock exchanges like Gemini were working to increase the effectiveness of market monitoring, and other platforms were taking measures to improve observation.
A report stated:
"The industry must be provided with serious market monitoring tools, which are being used in traditional trading platforms for a long time. It is necessary to detect and prevent suspicious trading activities. Platform can't protect its customers from manipulations on market and other violations, if it doesn't know anything on such practices in advance."
Special attention of the report is paid to Kraken exchange, which refused to cooperate, having criticized the initiative publically:
"The Procuracy has failed to examine practices and processes of Kraken, Binance, Huobi and Gate.io, concerning manipulative trading. Moreover, a public statement of Kraken platform caused anxiety. It reported, that market manipulation did not matter to most of cryptocurrency traders, but acknowledged a large number of fraudulent schemes in the industry."
It's noteworthy, that data on Kraken, Binance and Gate.io exchanges were transferred to the Department of Financial Services after investigation of their activities in New York. The reason of it was a potential violation of the virtual currencies rules, valid in New York state.
The Procuracy found out, that some exchanges had an opportunity to measure their own trading volume, emanating from their own transactions. For example, Circle exchange makes less than 1% of deals on Poloniex, while BitFluer USA alone makes about 10%, and Coinbase — almost 20%.
A report also noted, that most of the exchanges identified their users, however, Tidex and Bitfinex don't consider it necessary to demand anything but email address from clients.