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Cryptocurrency News Articles
Binance Internal Probes Overshadowed by Market Manipulation Allegations
May 09, 2024 at 11:39 pm
The Wall Street Journal reports that Binance, despite internal investigations, disregarded evidence of market manipulation to maintain client relationships. One instance involves DWF Labs, led by Andrei Grachev, allegedly creating "artificial volume" and manipulating token prices. Binance allegedly chose not to terminate DWF's relationship, despite internal recommendations, with two traders reportedly accounting for two-thirds of Binance's 2023 volume.
Allegations of Market Manipulation Overshadow Binance's Internal Investigations
A comprehensive investigation conducted by the Wall Street Journal has cast a shadow on Binance, uncovering allegations that the cryptocurrency exchange has repeatedly disregarded its internal investigations into market manipulation, prioritizing the preservation of relationships with influential clients.
DWF Labs: A Case Study in Manipulation
In 2023, a trading firm known as DWF Labs, helmed by Russian entrepreneur Andrei Grachev, emerged as a prominent player on Binance's platform, generating over $4 billion in monthly trades. Allegations surfaced that DWF Labs actively manipulated the market by creating "artificial volume" to inflate token prices.
One such instance involved Yield Guild Games, a token in which DWF invested. Following a series of tweets by Grachev promoting the token, DWF Labs engaged in substantial token sales, leading to a precipitous collapse in the token's value.
Internal Investigations Thwarted
Binance's internal surveillance team flagged DWF Labs for suspicious activity and recommended its removal from the platform, citing evidence of wash trading—a practice that artificially inflates trading volume. However, a second internal team conducted a subsequent investigation and reportedly concluded that any wash trades were unintentional, exonerating DWF Labs.
Critics suggest that Binance's reluctance to offload DWF Labs may have been influenced by the firm's significant trading volume, which accounted for approximately two-thirds of Binance's total volume in 2023.
Internal Investigations Team Disbanded
Following the surveillance team's report on DWF Labs, the head of the team was abruptly fired. Several investigators were subsequently laid off under the guise of cost-cutting measures, while others resigned in protest.
Tron Foundation: A Controversial Alliance
The allegations extend beyond DWF Labs, implicating other high-profile entities. Andrei Grachev previously held a leadership role at Huobi, now known as HTX, and advised its Russian operations. HTX is closely associated with Justin Sun, who also leads the Tron Foundation.
In 2022, the Securities and Exchange Commission (SEC) charged Sun and the Tron Foundation with market manipulation and wash trading. Despite this, Binance chose to retain the Tron Foundation and even designated TrueUSD, a stablecoin allegedly owned by Sun, as a "zero-fee" base asset.
FTX's Knowledge of TrueUSD's Ownership
FTX, the now-defunct cryptocurrency exchange, reportedly had knowledge of Justin Sun's alleged ownership of TrueUSD. Despite Sun's denial of such ownership, he has admitted to being a "partner market maker" for the asset.
Culture of Tolerance
The Wall Street Journal report exposes an alleged culture within Binance that tolerates illicit activity as long as it benefits the exchange's bottom line. This raises serious concerns about the integrity of Binance's platform and the credibility of its internal compliance mechanisms.
Binance's Silence
Amidst the growing allegations, Binance has remained largely silent, declining to comment on the specific accusations. The exchange's lack of transparency raises further questions about its commitment to accountability and regulatory compliance.
Impact on the Cryptocurrency Industry
The allegations against Binance have sent shockwaves through the cryptocurrency industry, casting doubt on the reliability of the largest cryptocurrency exchange. Regulators around the world are likely to scrutinize Binance's operations and practices with increased intensity.
The revelations underscore the urgent need for robust regulation within the cryptocurrency industry to prevent market manipulation and protect investors from illicit activity.
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