> They can't add fake liquidity because then the individual who attempts to lift the ghost order will realize.

...Unless there's magically someone filling it just before they do (i.e. frontrun by an internal bot) every time they try. I have observed exchanges doing this. I don't believe that Coinbase is one of them, though, as others have pointed out with their positioning they are better of not to.

Trying to tie it to real liquidity is a strawman. They don't need to manipulate the order book for USD/BTC conversions. They can manipulate options, trades between different crypto currencies, futures and the like.

Here's an article about spoofing and market manipulation of real money in regulated excanges: https://ankura.com/insights/spoofing-market-manipulation-and...

This quote from the above article, does not apply to crypto exchanges so far as I know:

"Rules govern how trading is done. Laws prohibit manipulative trading practices on both securities and futures exchanges."

"To date, no cryptocurrency exchange has registered with the SEC" from https://medium.com/semadaresearch/should-cryptocurrency-exch...