The Wall Street Journal accuses Binance of ignoring market manipulation by market makers
A few days ago, the "Wall Street Journal" released a long report, based on interviews with former employees of the exchange Binance, reporters and self-collected information, pointing out that Binance investigators discovered in 2023 that the cryptocurrency market maker DWF Labs conducted a transaction worth 3 Billions of dollars in wash trades, but Binance ignored the problem and even fired the head of the monitoring team at the time. Binance also issued a statement denying the accusation.
According to the Wall Street Journal, DWF Labs is a top Binance “VIP 9” user, representing the company’s monthly transactions of at least $4 billion. As a market maker, DWF Labs' main goal is to maintain market liquidity. It usually buys and sells assets at the same time, participates in buying and selling at any time, keeps the trading market liquid, and earns the price difference between buying and selling.
However, in a proposal DWF Labs sent to potential clients, DWF Labs used its activity in the market to drive up the price of specific tokens. This includes "artificially" manipulating additional trading volume on exchanges such as Binance to create the illusion of high market demand and attract traders to invest.
According to former Binance insiders, Binance investigators found that DWF Labs manipulated the price of YGG and at least six other tokens, and conducted more than $300 million in wash trades in 2023, which was a clear violation of the terms of use, and Recommend to the company to delete the customer. The head of Binance’s monitoring department was fired after reporting the incident.
Binance responded: The company has a strong market monitoring framework and cannot tolerate it
The Wall Street Journal pointed out that after review, Binance believed that there was insufficient evidence to indicate that DWF Labs was involved in market abuse. The wash trading identified by the monitoring team may be an accidental self-trading (the same trader was involved in market abuse). trading on two different accounts) rather than intentional market manipulation.
In addition, Binance executives also believed that the head of the market monitoring team worked too closely with the DWF Labs competitor who made the complaint in this case. A week after the investigation was reported, Binance fired the head of its surveillance team, and over the next few months more investigators left Binance, partly due to the company's cost-cutting strategy, while some left voluntarily.
Binance also responded immediately after the "Wall Street Journal" report was released, stating that Binance cannot tolerate market abuse and firmly denies any accusations against Binance's market monitoring procedures. "We have a strong market monitoring framework that can identify And take action against market abuse, any user who violates our terms of use will be removed."
In the past 3 years, Binance has removed nearly 355,000 users who violated its terms of use and traded more than $2.5 trillion.
Binance also appealed to the 190 million users on the platform to rest assured, stating that there will be no favoritism regardless of the size of user transactions. However, Binance also stated that deleting users is not a decision that can be made lightly. The company will conduct in-depth investigations and use a variety of tools. It will only delete users when there is sufficient evidence that the user has violated the terms of use.
He Yi, the co-founder of Binance, also posted in He Zhizhi said: "There is competition among market makers, and their methods are very shady. You can buy PR as you like, but don't involve Binance."
Source: WSJ, Cointelegraph
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