Binance has suspended a suspicious account that allegedly made millions of dollars in profits through front-running activities. The on-chain data analyst @FatManTerra exposed the anonymous account that had been accumulating altcoins before they were listed, manipulating prices and selling them at a higher price once they were listed.
On March 28, @FatManTerra revealed that the account had made tens of millions of dollars in profits through these activities. Two days later, Binance confirmed that it had frozen $2 million associated with the account before the tweet was posted. The exchange also thanked @FatManTerra for exposing the illicit activity, and the user whose account was frozen did not request a review of the suspension.
In response to a comment from another user, CZ, the founder of Binance, announced that the exchange would donate the illegally obtained profits to charity organizations. CZ also emphasized the importance of reporting potential leaks and illegal activities, stating that it benefits everyone.
Thank you for pointing this out. We had frozen $2m associated with the address in question before your thread (and they never asked to re-claim). We are also always fighting potential leaks, etc. We welcome you to point them out in the future too. Helps all of us.
— CZ 🔶 Binance (@cz_binance) March 29, 2023
According to @FatManTerra, the account with the wallet address 0xd23 bought FXS on Uniswap worth $53,000 immediately after being established. The account divided its trades into several small batches to avoid price slippage and detection. The user continuously bought FXS for six days, and three days after the last trade, Binance listed FXS, causing the price to rise sharply. The account then dumped all the tokens on the exchange.
3 days after the insider’s final FXS purchase, like magic, Binance lists FXS, resulting in a large price increase. The insider then sends all of his FXS to an exchange, booking a healthy profit at the expense of fair market traders that didn’t have asymmetrical info. (3/9) pic.twitter.com/fbHv6uyWMy
— FatMan (@FatManTerra) March 28, 2023
The second wallet address that @FatManTerra identified, starting with 0x51, reportedly purchased TVK worth 131 ETH. Two days after the purchase, TVK was listed on Binance, and the account received 277 ETH. The user is said to have executed a total of 16 front-running trades, meaning that they used internal information to buy assets before they were publicly listed to make a profit.
Front-running is illegal in the securities market, but there are no specific regulations on it in the crypto market. Such internal trades can have significant consequences for retail investors. A coin that could have risen by 20% may only rise by 10%, and no one would realize that someone was secretly stealing market profits through unethical behavior.
It is unclear how the front-running account obtained information about the listings. The news emerged just as Binance was being sued by the US Commodity Futures Trading Commission (CFTC) on various charges, including insider trading.
After the lawsuit was filed, CZ announced that the exchange would maintain rules to prevent fraudulent activities. For example, Binance prohibits employees from trading within 90 days after buying coins or tokens. The exchange also limits the trading of crypto assets by employees who work in departments that hold information about those assets. Additionally, all Binance employees are prohibited from participating in future.
Read more:
- Breaking: CFTC Files Complaint Against Binance And Founder Over Alleged Violation Of US Regulations
- CFTC Declares Bitcoin, Ethereum, And Litecoin As Commodities In Binance Indictment, Contradicting SEC’s View On Security Classification
- Investors Withdrew $1.6 Billion From Binance After CFTC Lawsuit
- Binance’s Response To FTX Collapse, Paxos’ BUSD, And CFTC Lawsuit: A Study Of Net Outflows And Reserves