A new report published by the New York Attorney General’s office on September 18 says that cryptocurrency exchanges are vulnerable to manipulation, conflicts of interest, and other consumer risks.

The report represents the results of the “Virtual Markets Integrity Initiative” launched in April, when New York Attorney General Eric T. Schneiderman sent letters to thirteen crypto exchanges, requesting information on their operations, internal controls and other key issues.

The move was taken in order to provide average investors with a better understanding of the risks and protections associated with cryptocurrency trading platforms, as well as increase transparency.

The recent report examines the practices of ten crypto trading platforms based in the U.S. and abroad, as well data collected by the Attorney General’s office about the state of digital currency markets as a whole.

The study found that the absence of accepted methods for auditing virtual assets results in the lack of a consistent and transparent approach to independently auditing digital currency traded on exchanges. This puts customers’ funds held on their exchange accounts at risk of attacks from hackers or theft. The report subsequently questions the issue of public protection and the sufficiency of the commercial insurance to cover possible losses.

The report further outlines abusive trading practices, emphasizing that the majority of crypto trading platforms deploy automated traders, offering them special conditions, which leaves retail customers at a disadvantage. It also states that digital currency exchanges involve numerous, overlapping lines of business that represent serious conflicts of interest. The report explains:

“Automated trading activities could also allow a single trader or group of traders to command multiple accounts simultaneously to obscure coordinated trading, in order to manipulate prices.”

The report notes, that several of the investigated platforms trade their own account in volumes that make up a significant portion of total trading. Several allow their employees to trade on their venue, which raises doubts about exchanges’ efforts to ensure employees do not use non-public data to obtain an advantage over other traders. Some of the platforms issue their own digital currencies or accept compensation in exchange for listing a virtual asset to trade. The report further reads: