Binance Fired Investigator Who Uncovered Market Manipulation at Client DWF Labs
Binance denied claims it had allowed market manipulation and stated that the individual was dismissed following an investigation that found the allegations against the client were not "fully substantiated."
Binance fired a member of staff who discovered evidence of market manipulation at crypto investment firm DWF Labs, one of the exchange's clients, according to a Wall Street Journal report on Thursday. The former employee and his colleagues on Binance's market surveillance team had been hired to detect signs of market manipulation and other illicit activities as part of the exchange's efforts to improve its image amid scrutiny from financial regulators.
The team found that VIP clients, those trading over $100 million per month, were involved in pump-and-dump schemes and wash trading, which are prohibited by Binance's terms and conditions, according to the WSJ article. DWF Labs, which generated more than $4 billion in monthly trades, emerged as a prominent investor in crypto projects in early 2023 when it was at the center of a series of funding rounds in a relatively calm market. Unlike the traditional venture capital model, the firm, whose founders made their fortune as crypto high-frequency traders, typically purchased millions of dollars worth of a project's token at a discount and profited when the price increased.
The Binance investigators submitted a report alleging DWF had manipulated the price of several tokens based on $300 million in wash trades in 2023, but Binance determined there was insufficient evidence of market abuse, according to the WSJ. A week after the report's submission, the head of the team was fired, according to the newspaper.
Binance denied claims it had allowed market manipulation and stated that the individual was dismissed following an investigation that found the allegations against the client were not "fully substantiated." After the article was published, DWF Labs stated in a posting on X that the allegations about it were "unsubstantiated and distorted the facts." Binance also responded, without referring to the member of staff's dismissal. "We do not tolerate market abuse," it said in an X post. "Over the last three years, we have removed nearly 355,000 users with a transaction volume of more than $2.5 trillion for violating our terms of use."
