Markets
Crypto Exchange Binance Fired Investigator Who Discovered Market Manipulation on DWF Labs Client: WSJ
Binance fired a team member that discovered evidence of market manipulation at crypto investment firm DWF Labs, one of the cryptocurrency exchange’s clients, the Wall Street Journal reported on Thursday, citing interviews with former and current Binance employees, documents, emails and other industry participants.
The former employee and his colleagues on Binance’s market surveillance team were hired to eliminate signs of market manipulation and other nefarious activity as part of the exchange’s efforts to clean up its act in the face of scrutiny from financial regulators.
The team discovered that “VIP” clients – those trading more than $100 million per month – were engaging in pump-and-dump and wash trading schemes that were prohibited by Binance’s terms and conditions, according to the article in WSJ.
DWF Labs, which had revenues of more than US$4 billion in monthly trades, emerged as a company prolific investor in crypto projects in early 2023, when it was at the center of a series of financing rounds in an otherwise calm market. Different from the traditional venture capital modelThe company, whose founders made their money as high-frequency crypto traders, typically bought millions of dollars worth of a project’s tokens at a discount and benefited when the price rose.
Binance investigators filed a report alleging that DWF had manipulated the price of several tokens based on $300 million in wash trades in 2023, but Binance deemed there was insufficient evidence of market abuse, the WSJ said. A week after the report was submitted, the team leader was fired, according to the newspaper.
Binance told the WSJ that it rejected allegations that it had enabled market manipulation, and the person was fired after an investigation concluded that the allegations against the customer were not “fully substantiated.”
Binance also responded, without referring to the employee’s dismissal. “Us do not tolerate market abuse” said in a post .
UPDATE (May 9, 11:15 am UTC): Adds Binance response in final paragraph.