Image courtesy of Binance Twitter page
- CEO of Binance allegedly aware of wash trading carried out on the Binance exchange right after the launch of its U.S. arm.
- The exchange is still at the receiving end of a lot of scrutiny from regulatory bodies and market players.
The U.S. Securities and Exchange Commission (SEC), recently slammed Binance with a lawsuit. The exchange is being accused of participating in wash trading, and CZ, the CEO of the exchange, has been receiving a lot of backlash as a result.
In the SEC’s lawsuit, the regulatory body is charging the exchange for participating in wash trading on the Binance U.S. platform. The lawsuit claims that the exchange carried out the act, using tons of user accounts that were being handled by a Swiss trading firm headed by Zhao, called Sigma Chain. The lawsuit was filed against the exchange, its CEO, and two other US affiliates.
According to a recent report from WallStreetJournal, internal information obtained from the company reveals that CZ has been fully aware of the event.
Wash trading is a form of market manipulation that could create the illusion of increased demand for an exchange’s metrics. This is achieved when the trading volume for an exchange is tweaked and inflated to appear significantly different from its actual value. This could usher in more players into an exchange, which would aid in increasing the exchange’s liquidity.
In response to allegations around wash trading being carried out on the Binance exchange, the CEO wrote “That was ourself, I think” in an internal message, not long after the launch of Binance’s U.S. arm. Interestingly, the exchange’s metrics revealed Binance.US processed as much as $70,000 in trades within the first hour of its launch. These numbers have been questioned by critics, following the exchange’s run with the SEC.
Study: 70% of cryptocurrency exchanges actively partake in was trading
It is worth noting that trade washing is an illegal practice in different parts of the world. However, a significant number of cryptocurrency exchanges, mostly unregulated, are guilty of participating in wash trading.
Backing these claims, was a study from the Journal of Management Science. According to the study, an estimated 70% of crypto trading volumes from the second quarter of 2019, could be traced back to wash trading.
“We strongly believe that the SEC’s allegations regarding wash trading are entirely unfounded, and based on a fundamental misunderstanding of the facts and a misapplication of the relevant law.”
Meanwhile, CZ has taken to Twitter to repeatedly call out crypto influencers, who he believes are behind the ongoing FUD being spread across the crypto community.
After laying off a significant number of its employees, insider sources claim that Binance laid off its workers, due to an ongoing probe from the U.S. Justice Department. However, CZ has pushed back on these claims, as he disclosed that the exchange is still actively hiring, and on the lookout for strong talents.
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