Leading cryptocurrency exchange Binance has started facing questions surrounding its handling of potential market manipulation, after a team of investigators suggested Web3 investment and market making firm DWF Labs was manipulating the market.
According to a Wall Street Journal report citing Binance insiders, investigators identified $300 million worth of wash trades allegedly conducted by DWF Labs last year. Wash trading involves buying and selling cryptocurrencies to artificially inflate prices or trading volume.
The issue reportedly came to light after Binance established a dedicated team in 2022 to investigate suspicious trading practices, with the team allegedly identifying hundreds of users in violation of the exchange’s terms of service and recommending their removal as part of its efforts to clean up its platform amid scrutiny from financial regulators.
The team found clients trading more than $100 million per month were engaging in wash trading and pump-and-dump schemes. Late last year, the team focused on DWF Labs, suspected of manipulating the price of the YGG token and several others, alongside the wash trading activity.
Despite these findings, Binance reportedly did not take action against DWF Labs, with the exchange claiming the evidence against the client was inconclusive and that the head of the investigative team was subsequently fired after an internal inquiry found no evidence of wrongdoing by DWF Labs.
Binance has disputed the findings, and added in a statement to Cointelegraph that it has a “robust market surveillance framework that identifies and takes action against market abuse.”
DWF Labs itself has vehemently denied the allegations, saying they were 2unfounded and distort the facts” on the microblogging platform X (formerly known as Twitter).
Binance further responded to the article o social media that over the past three years it has “offboarded nearly 355,000 users with a transaction volume of more than $2.5 trillion” for violating its terms of use.
Per the exchange, competition among market makers is fierce and its investigation team’s job is to be “neutral and look at the evidence without any bias, including bias that might come from market-making firms’ claims against their competitors.”
Featured image via Unsplash.
