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Binance is responding to the allegations made by DWF Labs on May 9. This comes after a revealing report from the Wall Street Journal (WSJ) that disclosed Binance’s termination of an employee who found evidence of market manipulation by DWF Labs, a significant player on the trading platform.
The WSJ report indicated that the terminated employee and his colleagues in Binance’s market surveillance team had detected occurrences of pump-and-dump schemes and wash trading executed by “VIP” clients, which included $300 million attributed to DWF Labs. These actions were in violation of Binance’s terms and conditions.
Binance & DWF Labs Allegation Involves $300 Million of Wash Trading
The investigators suggested that DWF Labs be removed from the platform, accusing them of manipulating the prices of various cryptocurrencies, including the YGG token.
In contrast, Binance initiated an investigation into the team’s findings, asserting that there was inadequate evidence of wash trading by DWF Labs. According to the WSJ, the head of surveillance was subsequently dismissed.
*Binance Fired Head of Surveillance After He Flagged DWF’s Suspected Market Manipulation, Sources Say — WSJ
— Tree News (@News_Of_Alpha) May 9, 2024
DWF Labs, an investor in cryptocurrency projects that gained recognition in 2023, was reportedly involved in trades exceeding $4 billion monthly on the Binance platform.
In light of the allegations, Binance denied the claims, emphasizing their zero-tolerance policy towards market manipulation.
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In response to WSJ, we affirm our strict market surveillance program. We do not tolerate market abuse.
Over the last three years, we have offboarded nearly 355,000 users with a transaction volume of more than $2.5 trillion for violating our terms of use.
Market maker…
— Binance (@binance) May 9, 2024
The exchange also highlighted its successful history of removing prominent traders who breached the rules. Binance stated that it had expelled over 355,000 users for violating its terms of service in the past, with the removed market makers having a total transaction volume of $2.5 trillion.
Binance & DWF Allegation Denounced as “Unfounded and Not Accurate”
DWF Labs issued a Telegram statement shortly after the WSJ report, which included a rebuttal to the claims that it engaged in price manipulation, artificial volume, and $300 million of wash trading on Binance in 2023.
“It has come to our attention that a recent article contains many allegations that we believe to be unfounded and that do not accurately represent our ethical business practices,” the market-making firm asserted. “We have always prioritized our relationship with our partners and the broader community, successfully supporting more than 700 portfolio companies in the crypto ecosystem. We take pride in being compliant, transparent, and diligent in our work.”
Last year, Binance resolved charges brought by multiple US regulators, agreeing to pay $4.3 billion in settlement over alleged violations related to operating an unregistered exchange, inadequate controls over market manipulation, and commingling of funds.
The US SEC’s lawsuit against Binance exchange resulted in a plea agreement and a settlement of $4.3 billion for breaching US anti-money laundering regulations. Binance co-founder Changpeng Zhao (CZ) also resigned as CEO as part of the settlement. He has been sentenced to four months in prison along with an additional fine of $50 million.
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