The Wall Street Journal Accuses Binance of Ignoring Market Manipulation by Market Makers
Recently, The Wall Street Journal released an extensive report based on interviews with former Binance employees, journalists, and self-collected data, alleging that Binance investigators discovered wash trading worth $300 million conducted by the cryptocurrency market maker DWF Labs in 2023. However, Binance allegedly ignored the issue and even fired the head of the monitoring team at the time. Binance has since issued a statement denying these allegations.
According to The Wall Street Journal, DWF Labs was a “VIP 9” user on Binance, indicating that the company conducted at least $4 billion in monthly transactions. As a market maker, DWF Labs’s main objective was to maintain market liquidity by buying and selling assets simultaneously, participating in trades to keep the market flowing, and profiting 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 price of specific tokens. This included artificially manipulating additional trading volume on exchanges like Binance, creating the illusion of high market demand, and attracting investors.
According to sources within Binance, investigators reportedly found that DWF Labs manipulated the prices of YGG and at least six other tokens, conducting wash trades worth over $300 million in 2023, which clearly violated the terms of use. The investigators recommended removing this client from the platform, but the head of the monitoring department was subsequently fired.
Binance’s Response: We have a robust market monitoring framework and cannot tolerate such behavior
The Wall Street Journal reported that, after a thorough review, Binance determined that there was not enough evidence to suggest that DWF Labs was involved in market abuse. The wash trades identified by the monitoring team were potentially accidental self-trades (where the same trader conducts trades on the market using two different accounts), rather than intentional market manipulation.
Furthermore, senior executives at Binance believed that the head of the monitoring team had been too closely aligned with DWF Labs’ competitors, who had filed the complaint. One week after the investigation report was submitted, Binance fired the head of the monitoring team, and in the following months, more investigators left Binance, partially due to the company’s cost-cutting strategy, while others left voluntarily.
After The Wall Street Journal report was released, Binance immediately responded, stating that it cannot tolerate market abuse and strongly denied any allegations against its market monitoring procedures. Binance stated, “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 removed nearly 355,000 users who violated its terms of use, with trading volumes exceeding $2.5 trillion.
Binance also reassured its 190 million users on the platform, stating that regardless of the size of a user’s trading volume, there would be no favoritism. However, Binance also emphasized that removing users is not a decision taken lightly, and the company conducts thorough investigations using various tools. Users will only be removed 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, and Binance ensures its fairness by not participating in such activities and accurately reporting them to the monitoring team and other regulatory bodies. He Yi said, “There is competition among market makers, and their methods can be shady, but Binance should not be involved.”
Sources:
WSJ, Cointelegraph
