Crypto exchange Binance froze an account that was allegedly involved in front-running trades on its platform.
In a March 28 Twitter thread, FatManTerra detailed how an anonymous individual made around $1.4 million worth of profit from front-running altcoin listings on Binance over the course of several months.
🧵 On-chain data reveals the covert operations of a Binance listings insider. Over the course of several months, this anonymous individual front-ran the infamous Binance listing pumps of multiple altcoins, booking a 7-figure profit. And he left a trail for us to follow… (1/9)
— FatMan (@FatManTerra) March 28, 2023
Citing on-chain research from “@spssnft,” FatManTerra highlighted two of the 16 instances of potential insider trading, where the person in question made a seven-figure profit at the expense of other traders.
The individual in question bought Frax Share’s native token FXS in small batches on decentralized exchange Uniswap to avoid detection three days before it was listed on Binance. After it was listed, the alleged insider sold the entirety of his FXS tokens on a centralized exchange for a significant profit.
Another wallet tied to the trader bought 131 ETH worth of Virtua’s native token TVK two days before its Binance listing. The trader cashed out 277 ETH after the listing-induced price surge, without even needing to use a centralized exchange.
When a token is listed on a major exchange like Binance, it typically leads to a considerable increase in price in a phenomenon that some have dubbed the “Binance effect.” Research from Ren & Heinrich shows that a Binance listing adds 41% to crypto prices within the first day of its trading on the exchange.
Those with knowledge of listings prior to the event stand to make a sizable profit, and those that purchase relatively low market-cap coins in the days leading up to it are likely those with inside information.
“The consequences of insider trading to retail investors are invisible yet crucial,” said FatManTerra.
“A coin that would otherwise have gone up 20% may only move up by 10%, and nobody ever finds out that someone is secretly stealing edge from the market using an unethical advantage,” he added.
Binance CEO CZ responded to FatManTerra’s Twitter thread on Wednesday, saying the exchange had already frozen $2 million from the address in question beforehand.
That's amazing – glad such strong action was taken!
After posting this, I also heard from a source with one of the involved counterparties that Binance had already reached out to request information for an investigation. It's great to see that you take these things seriously.
— FatMan (@FatManTerra) March 29, 2023