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A group of unknown investors made significant profits using insider information about upcoming listings on cryptocurrency exchanges Binance, Coinbase and FTX. This is written by The Wall Street Journal, citing data from the analytical company Argus.
Argus discovered 46 digital wallets that purchased Gnosis (GNO) tokens totaling $17.3 million in August 2021.
“The profit from operations with tokens that are visible in the blockchain amounted to more than $ 1.7 million, however, their true income is most likely much higher, since part of the assets were transferred from wallets to exchanges, and not exchanged directly for stablecoins,” Argus believes.
For example, one of the addresses invested $360,000 in the GNO six days before the token was listed on Binance. After placement on the platform, the price of the asset skyrocketed – the investor liquidated the position, receiving about $ 140,000 of income.
The company noted that addresses associated with insider trading showed signs of activity until April 2022.
The problem of insider trading in the cryptocurrency market is not the first time that has been raised. In April 2022, opinion leader Cobie discovered an address that had invested “hundreds of thousands of dollars” in tokens featured on 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, of their own volition or not, may leak information to third parties engaged in illegal activities. We do not tolerate this and follow these practices, conducting investigations when necessary.”
Last Thursday, Coinbase legal adviser Paul Grual also admitted that sometimes unscrupulous traders manage to get hold of internal information about upcoming listings.
At the same time, he stressed that it is not always about the leakage of information by people – 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 have to test it in such a way that it is reflected in the blockchain. These signals are not obvious to most market participants, but are available to everyone and can be detected if someone searches carefully enough,” he wrote.
Following a recent WSJ release, Binance CEO Changpeng Zhao said his company has a “zero-tolerance policy” on 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 checked the wallets indicated by Argus – none of them are associated with anyone from the Binance team.
“That’s why we try not to disclose information about the listing even to the project teams. But sometimes this cannot be completely avoided when we need technical assistance in integrating wallets and so on,” Zhao wrote.
Recall that in September 2021, Bloomberg reported on the plans of the US Futures Trading Commission to check Binance for insider trading and market manipulation.
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