A crypto trader, who remains unidentified, made more than $100,000 in profits after buying a token just minutes before it was listed on Binance, the leading cryptocurrency exchange. On-chain investigator Lookonchain analyzed the transaction data to make the discovery.
According to on-chain analysis, the trader bought Gains Network (GNS) tokens worth $208,335 just 30 minutes before Binance listed the token. The token’s price then surged by 51% after the listing, from $7.92 to $12.01, and the trader sold their position for a profit of $106,747 within an hour.
A smart money bought 26,881 $GNS at a cost of $208,335 before #Binance announcement of listing $GNS.
Then sold 26,881$GNS and got $315,082.
This guy made $106,747 in a few hours!https://t.co/B5gTvWwAN5 pic.twitter.com/f7G0yyIMPm
— Lookonchain (@lookonchain) February 17, 2023
Lookonchain referred to the timely trade as “smart money,” but recent trends suggest that intelligence may not be the only factor involved.
Over the past year, some of the best cryptocurrency exchanges have been accused or confirmed of front-running, a tactic where traders with insider information purchase large amounts of tokens that are expected to rise in value, sometimes in anticipation of being listed on a centralized crypto exchange.
Ishan Wahi, a former product manager at Coinbase, recently pleaded guilty to his involvement in an insider trading scheme that resulted in $1.1 million in profits. This case has been deemed the first insider trading case to involve cryptocurrencies by federal prosecutors.
In July, when the charges were first announced, Binance CEO Changpeng Zhao, condemned the actions of the Coinbase employee and spoke out against front-running and insider trading, calling for them to be criminal offenses in all countries regardless of whether or not they involve cryptocurrencies or are regulated.
https://twitter.com/cz_binance/status/1550149800838189056?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1550149800838189056%7Ctwgr%5E999fa01e4c2787a20254fabed9e0b09804327319%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fdecrypt.co%2F121651%2Ftrader-makes-100k-front-running-token-listing-binance
Binance, has also been accused of participating in front-running and insider trading.
Recently, Conor Grogan, the head of product at Coinbase, claimed that affiliated wallets had repeatedly purchased tokens just before they were listed on Binance. These purchases reportedly resulted in millions of dollars in profits.
Interestingly, the same wallet address that was mentioned in Grogan’s allegations and a related story by The Wall Street Journal was also linked to profiting from the GNS listing. This raises further concerns about potential unethical practices taking place at Binance and other cryptocurrency exchanges.
It appears that there is a pattern of Binance front-running over 18+ months
I found connected wallets that:
-Bought $900k Rari seconds before and dumped minutes after listing
-Bought ~78K ERN between June 17 and June 21 and sold right after listing announcement
-Did same w/ TORN https://t.co/yAolrfeHkO pic.twitter.com/VRq3vzfcgd— Conor (@jconorgrogan) January 23, 2023
The trade was executed by a wallet that had already been identified for being associated with similar questionable trades, making it difficult to prevent such exploits if they are indeed based on insider knowledge.
According to reports, Binance has implemented a policy to prevent employees from engaging in short-term trading. However, this policy may not be sufficient to prevent insider trading.
For example, former Coinbase product manager Ishan Wahi shared insider information about upcoming token listings with his brother and friend, a practice that is not prohibited by Binance’s internal policies.
Unlike Coinbase, which is based in the United States, many cryptocurrency exchanges such as Binance primarily operate outside of the jurisdiction of American regulators for their global business.