Crypto Industry Might Have The Insider Trading Problem

Crypto Industry Might Have The Insider Trading Problem

According to a Wall Street Journal article, numerous crypto investors benefit from inside information about when exchanges may lose tokens.

Based on publicly available data, the report shows that some wallets have a tendency of buying tokens days before they are listed and selling them soon afterwards.

Most major exchanges, including Binance, Coinbase, and FTX, appear to be engaging in this behavior. The launch of a token on a major exchange is generally a brief trigger for its price.

In August, a wallet accumulated $360,000 in Gnosis coins in just six days. Binance stated that Gnosis will be listed on the seventh day, causing the price to rise to more than seven times its seven-day average.

The wallet began selling four minutes after Binance announced the listing and sold out in less than a day. The transaction earned them $500,000, with a profit of around $140,000. According to the investigation, this isn’t the first time the wallet has done something similar.

46 wallets purchased $17.3 million in Cryptocurrencies immediately before they were posted on the three major exchanges, according to Argus. The owners’ identities, however, are unknown.

Although the sale of the tokens generated more than $1.7 million in public gains, the true earnings are likely larger. Many wallets, according to the firm, have shifted a portion of their holdings to exchanges rather than selling directly.

The problem of insider trading in cryptocurrency has resurfaced. Regulators and observers have often stated that this strategy disadvantages regular investors. But thus far, there hasn’t been enough action.

The claim has been denied by the exchanges mentioned in the report. Employees are not allowed to trade based on privileged knowledge, according to company compliance policies.

Sam Bankman-Fried, the CEO of FTX, said that his company strictly prohibits its employees from trading tokens that will be traded.

Binance CEO Changpeng Zhao said on Twitter that the company has a “zero-tolerance policy” and that “we hold ourselves to the highest standards.”

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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