Article Title: Wall Street Journal Accuses Binance of Ignoring Market Manipulation by Market Makers
Recently, the Wall Street Journal published an extensive report that combines interviews with former Binance employees, journalists, and self-collected data. The report alleges that Binance investigators discovered wash trading worth $300 million conducted by the cryptocurrency market maker DWF Labs in 2023, but Binance ignored the issue and even fired the head of the monitoring team at that time. Binance has responded to these allegations by denying them.
According to the Wall Street Journal report, DWF Labs is a “VIP 9” user of Binance, indicating that the company conducts at least $4 billion in monthly transactions. As a market maker, DWF Labs aims to maintain market liquidity by simultaneously buying and selling assets and participating in trades to keep the market fluid while earning profits from the price difference between buying and selling.
However, in a proposal sent to potential clients, DWF Labs used its activity in the market to drive up the prices of specific tokens. This included artificially manipulating additional trading volumes on exchanges like Binance, creating an illusion of high market demand, and attracting investors.
According to former Binance insiders, Binance investigators found that DWF Labs manipulated the prices of YGG and at least six other tokens, conducting wash trading worth over $300 million in 2023, a clear violation of the terms of use. They recommended that the client be removed. However, the head of Binance’s monitoring department was dismissed after submitting the report.
Binance’s Response: The company has a robust market monitoring framework and cannot tolerate such behavior
The Wall Street Journal points out that after a thorough review, Binance concluded that there was not enough evidence to suggest that DWF Labs engaged in market abuse. The wash trades identified by the monitoring team may have been accidental self-trades (a single trader conducting trades with two different accounts on the market) rather than intentional market manipulation.
In addition, Binance’s top management believes that the head of the monitoring team had collaborated too closely with DWF Labs, the complainant and competitor, in this case. One week after the investigation report was submitted, Binance dismissed the head of the monitoring team, and in the following months, more investigators left Binance, some due to the company’s cost-cutting strategy, while others left voluntarily.
Binance immediately responded to the Wall Street Journal’s report by stating that it cannot tolerate market abuse and strongly denies any accusations against its market monitoring procedures. “We have a robust market monitoring framework that can identify and take action against market abuse. Any user who violates our terms of use will be removed.”
Over the past three years, Binance has deleted nearly 355,000 users who violated the terms of use, with a total trading volume exceeding $2.5 trillion.
Binance also reassures its 190 million users on the platform that regardless of the size of their trading activities, there will be no favoritism. However, Binance also emphasizes that user deletion is not a decision that can be made lightly, as the company conducts thorough investigations and uses multiple tools. User deletion only occurs when there is sufficient evidence of a violation of the terms of use.
Binance co-founder He Yi also posted on X, stating that the company’s market monitoring for market makers is very strict. Binance ensures its fairness and does not participate in any misconduct, and will truthfully report to the monitoring team and other regulatory authorities. He Yi said, “There is competition among market makers, and the methods can be dark, but don’t implicate Binance.”
Source:
WSJ
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Cointelegraph