The Wall Street Journal reported on Thursday, citing interviews with former and current Binance employees, documents, emails, and other industry participants, that Binance fired a staff member who discovered evidence of market manipulation at cryptocurrency investment firm DWF Labs, one of the exchange’s clients.
In an effort to clean up its act in front of financial regulators, Binance employed the former employee and his colleagues on its market-surveillance team to look for indicators of market manipulation and other illicit activity.
According to the WSJ story, the team discovered that “VIP” clients—those who transacted with more than $100 million each month—were participating in wash trading and pump-and-dump operations, which are against Binance’s terms and conditions.
In early 2023, DWF Labs, which was transacting over $4 billion a month, became a prominent investor in cryptocurrency ventures as it was at the centre of a wave of investment rounds in a generally calm market. The company, whose founders made their fortune as cryptocurrency high-frequency traders, operated differently from the usual venture capital model in that it typically purchased millions of dollars’ worth of a project’s token at a discount and took advantage of price increases.
According to a report filed by the Binance investigators, DWF was accused by the WSJ of manipulating the price of many tokens in 2023 by using $300 million in wash transactions as leverage. However, Binance concluded that the proof of market manipulation was insufficient. The publication said the team leader was sacked a week after the report was turned in.
Binance informed the Wall Street Journal that it denied allegations that it had approved market manipulation. The employee was fired when an investigation revealed that the accusations made against the customer were not “fully substantiated.”
Following the publication of the report, DWF Labs said in a post on X that the accusations made against it were “unfounded and distort the facts.”
Without mentioning the staff member’s termination, Binance also reacted. In an X post, it stated, “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.”