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A report from the Wall Street Journal has alleged that on multiple occasions, Binance ignored its own internal investigations about market manipulation in favor of preserving relationships with important clients.
In one case in 2023, a trading firm called DWF Labs, led by Russian Andrei Grachev, was making over $4 billion in trades on Binance per month. DWF allegedly offered a service to clients where it would create “artificial volume” and drive up the price of tokens.
One example described in the report is about Yield Guild Games, a token that DWF invested in. Grachev tweeted about it, DWF sold a huge number of tokens, and very shortly afterwards, the price of the token collapsed.
Following some of these events, the internal surveillance team at Binance recommended removing DWF and included wash trades it identified as part of this analysis.
However, a second internal Binance team investigated the surveillance team, allegedly determining that the wash trades conducted by the firm, which advertised its ability to create “artificial volume,” may have been accidental, after which Binance chose not to offload DWF Labs.
The report claims that two traders accounted for two-thirds of all Binance volume in 2023, which may have motivated the reticence.
This internal surveillance team also raised concerns about Binance’s own internal accounts trading cryptocurrencies on Binance, an allegation which was echoed in the Commodity Futures Trading Commission (CFTC) complaint that Binance recently settled.
Following the surveillance team’s report about DWF, the Wall Street Journal noted that the head of the team was fired, several other investigators were ‘laid-off’ as a ‘cost-saving measure’, and others resigned.
Tron and Justin Sun
Grachev previously worked for Huobi, now HTX, leading it’s Russian arm. HTX is advised by Justin Sun, who also leads the Tron Foundation, which also ran afoul of Binance’s internal investigators.
In the months following Sun and the Tron Foundation being charged by the Securities and Exchange Commission (SEC) with market manipulation and wash trading last year, Binance decided to off-board the Tron Foundation.
However, despite the alleged market manipulation of the Tron Foundation, Binance did still decide to make TrueUSD a ‘zero-fee’ base asset for a variety of trading pairs around the same time they were offboarding Tron Foundation. Sun has been accused of owning TrueUSD but denies the accusations. Sun has admitted he is a ‘partner market maker’ for this asset, and the previous issues with Sun projects manipulating markets did not prevent Binance from embracing this project.
More recently, the market cap of TrueUSD has collapsed as Binance has moved to other stablecoins like First Digital USD.
The Wall Street Journal report alleges a culture of allowing illicit activity to continue as long as it benefits Binance.