According to The Wall Street Journal, an analysis by Argus, which helps the firm manage employee trading, shows that some cryptocurrency investors benefit from insider information about when the exchange will list the token.
The report, based on existing public data, shows that several wallets exhibit a pattern of buying tokens a few days before listing and selling them immediately after listing.
This practice appears to be common on most major exchanges, including Binance, Coinbase, and FTX. Tokens listed on major exchanges are often temporary catalysts for their prices.
According to blockchain data, one wallet accumulated $360,000 worth of Gnosis coins in 6 days in August. Binance announced that it would list Gnosis on its seventh day, causing the price to rise to more than seven times the average price over the past seven days.
The wallet went on sale 4 minutes after Binance announced the listing and liquidated all assets within 24 hours. They made $500,000 from the sale, pocketing a profit of about $140,000. Analysis revealed that this is not the first time the wallet has done the same thing.
Argus found that 46 wallets bought $17.3 million worth of cryptocurrency before listing on the three major exchanges. However, the identity of the owner remains unknown.
While the visible profit from selling the tokens was over $1.7 million, the actual profit could be higher. As the company reported, many wallets moved some of their stakes to exchanges instead of selling them outright.
The analysis focuses on the period from February 2021 to April 2022. It only considered wallets that showed a pattern of buying tokens prior to listing.
This analysis brings the topic of insider trading in cryptocurrencies back to the public eye. Regulators and observers have been talking about how the practice could disadvantage retail investors. But so far, there hasn’t been enough action.
Binance and FTX issue a statement
However, the exchanges listed in the analysis report deny this claim. They said their compliance policies prohibit employees from trading based on privileged information.
“Our security team has a long-standing process, including internal systems, to investigate and hold accountable those who engage in this type of behavior, and immediate dismissal is the minimum response,” a Binance spokesperson reportedly said.
This sentiment was also reiterated by FTX CEO Sam Bankman-Fried, who revealed that his company explicitly prohibits its employees from trading the token that will be listed.
Meanwhile, Binance CEO Changpeng Zhao (CZ) also reiterated this on Twitter, saying the company has a “zero tolerance policy, [we] hold ourselves to the highest standards.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/wall-street-journal-insider-trading-is-prevalent-in-the-cryptocurrency-space/
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