A group of unknown investors made significant profits using insider information about upcoming listings on the Binance, Coinbase and FTX cryptocurrency exchanges. The Wall Street Journal writes about this, citing data from the analytical company Argus.
Argus discovered 46 digital wallets that purchased Gnosis (GNO) tokens for a total of $17.3 million in August 2021. Immediately after listing on popular trading platforms, they sold the assets, generating income.
“The profit from operations with tokens that are visible in the blockchain amounted to more than $1.7 million. However, their true income is likely to be much higher, since part of the assets was transferred from wallets to exchanges, and not exchanged directly for stablecoins,” they say. Argus.
For example, one address invested $360,000 in GNO six days before the token was listed on Binance. After being placed on the platform, the price of the asset skyrocketed – the investor liquidated the position, receiving about $140,000 in income.
The company noted that insider trading addresses showed signs of activity up until April 2022.
The problem of insider trading in the cryptocurrency market is raised not for the first time. In April 2022, influencer Cobie discovered an address that invested “hundreds of thousands of dollars” in tokens listed on the Coinbase Asset Listing 24 hours before it was published.
Found an ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl pic.twitter.com/5QlVTjl0Jp
— cobie (@cobie) April 12, 2022
Shortly thereafter, Coinbase CEO Brian Armstrong wrote:
“There is always the possibility that someone inside Coinbase, willingly or not, may leak information to third parties engaged in illegal activities. We do not tolerate this and monitor these practices by conducting investigations when necessary.”
Last Thursday, Coinbase legal adviser Paul Grewal also acknowledged that sometimes unscrupulous traders manage to get hold of inside information about upcoming listings.
At the same time, he emphasized that it is not always about people leaking information – sometimes insiders receive data directly from the blockchain.
We recently posted a blog diving into potential front-running around our assets. We take these reports extremely seriously, so today I want to share an update on our asset listing process and how it’s helping prevent misuse of company information. 1/4 https://t.co/cZfZ1LxGR2
— paulgrewal.eth (@iampaulgrewal) May 19, 2022
“For example, sometimes before listing an asset, we need to test it in a way that will be reflected in the blockchain. These signals are not obvious to most market participants, but are available to everyone and can be discovered if one searches carefully enough,” he wrote.
Following a recent WSJ publication, Binance CEO Changpeng Zhao stated that his company has a “zero tolerance policy” regarding insider trading practices.
This is why we even try not to let project teams know when they will be listed. But sometimes it can’t be completely avoided when we require technical assistance in wallet integration, etc.
Please use the above whistleblower email when you notice suspicious activity. 🙏
— CZ 🔶 Binance (@cz_binance) May 21, 2022
According to him, independent analysts have checked the wallets listed by Argus – none of them are associated with anyone from the Binance team.
“That’s why we try not to share listing information even with project teams. But sometimes it can’t be completely avoided when we need technical assistance in integrating wallets and so on,” Zhao wrote.
Recall that in September 2021, Bloomberg announced plans for the US Commodity Futures Trading Commission to check Binance for insider trading and market manipulation.
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