Binance, a popular cryptocurrency exchange, is facing increased scrutiny and doubts about its commitment to fair trading. Recent allegations have emerged accusing the exchange of ignoring its own rules against market manipulation.
The Wall Street Journal reported that Binance fired the head of its market surveillance team after he raised concerns about questionable activities by DWF Labs. These activities, which included pump-and-dump schemes and wash trading, are clear violations of Binance’s guidelines and could lead to legal issues in traditional markets.
The fired leader and his colleagues from the traditional finance world attempted to raise Binance’s standards to align with regulatory norms. They discovered that some VIP clients were involved in shady deals that compromised the integrity of the platform.
In response to these accusations, Binance took to Twitter to deny any leniency towards such practices on their platform. They also claimed to have removed nearly 355,000 users in the past three years for breaking their terms, handling transactions worth over $2.5 trillion.
Yi He, co-founder of Binance, also addressed the controversy, emphasizing the exchange’s vigilance in monitoring market makers. She acknowledged the competitive nature of market makers and unethical tactics that may be employed, but firmly stated her opposition to such involvement.
This issue is part of a larger regulatory challenge faced by Binance. In late 2023, US regulators criticized the platform for prioritizing profits over user protection, resulting in a $4.3 billion fine for violating anti-money laundering standards. Additionally, Binance’s founder, Changpeng Zhao, has recently been sentenced to four months in jail, highlighting the ongoing legal troubles the exchange faces.
The WSJ report, based on internal investigations and reviews of company documents and emails, suggests that the surveillance team’s recommendations were often disregarded if they conflicted with the interests of significant clients. Despite improvements in monitoring tools, the firing of this key employee raises concerns about Binance’s commitment to transparency and fairness.
According to the WSJ, Binance heavily relies on VIP customers, who account for two-thirds of the total trading volume. The monitoring team had recommended action against the Tron Foundation and the removal of DWF, but this was objected to by the head of Binance VIP. The compliance department deemed there was insufficient evidence and believed the surveillance team leader was biased against DWF’s competitors, leading to his dismissal.
Binance’s own investigations found that DWF had manipulated the price of YGG and several other tokens, engaging in over $300 million of wash trading in 2023. Binance argued that the flagged transactions were legitimate proprietary trades and not manipulation. The company also suspected that the monitoring team head had collaborated too closely with DWF’s competitors, resulting in fraud accusations.
These events raise concerns about Binance’s handling of insider market manipulation. The company’s actions and statements following these findings continue to generate debate and worry among traders and investors.
