Crypto exchange Binance, which has been under the yoke of criticism from financial regulators for several months now, is now featured in an official investigation by the US Commodity Futures Trading Commission (CFTC).
Representatives of the latter suspect the organization of insider trading, that is, the process of trading cryptoassets with access to information that is closed to most investors and traders. And this situation does not look particularly positive for the platform.
Note that Binance has recently come under the scrutiny of regulators. Because of this, the day before, the head of the platform, Changpeng Zhao, even admitted the need to create a central office for the exchange.
At the same time, he previously stated that such an approach simply does not suit the company, and its employees work in various parts of the world and are constantly moving.
What’s happening with Binance?
The CFTC had a negative attitude towards Binance before. The reason is that the members of the Commission believe that the American division of the exchange provides services to US clients on an illegal basis. In addition, the CFTC is still trying to recognize Bitcoin as a commodity that is subject to regulation in accordance with the rules established by the body.
We will remind, other regulators have previously confirmed that they do not consider Bitcoin as a security, so problems for exchanges because of the main coin do not threaten. Back in 2018, the head of the corporate finance department of the US Securities and Exchange Commission, William Hinman, stated that BTC and ETH cannot be classified as securities, since cryptocurrency buyers did not expect a certain percentage of profitability in the future.
A similar point of view in 2019 was voiced by the head of the regulator Jay Clayton. He motivated his position by the fact that cryptocurrencies are able to replace national currencies like the dollar, euro or yen. Such a product cannot be definitely classified as securities, since in this case it plays the role of a medium of exchange.
According to Decrypt journalists , Binance faced negative attitudes not only from American financial regulators. Active criticism of the company’s activities is conducted in the UK, Japan, Italy, Singapore, the Netherlands and several other countries.
Insider trading, in the case of Binance, could mean that exchange employees placed buy / sell orders for the coin, taking into account the information about the order flow of their clients and a greater understanding of the future movement of the asset price. Artificial market manipulation can also take place here, given the fact that Binance is the first exchange in the industry in terms of daily transaction volume. However, there are no details of what is happening yet, in addition, it turned out to be learned about what is happening thanks to the Bloomberg report .
Note that representatives of the trading platform reject any insider trading accusations. At the request of journalists about this, the experts of the exchange said that a special group would be created within it to «investigate the possible involvement of some employees in insider trading. «
A similar situation is observed on the leading NFT token trading platform called OpenSea. Last week, the head of the exchange’s new product development department, Nate Chastain, was accused of insider trading in unique tokens. It is assumed that he bought them with funds from a secret crypto wallet in advance. Then the purchased lot was placed on the main page of the platform, which attracted attention to it.
Thus, the employee earned on other users of the platform, using his power. Naturally, this approach can hardly be called fair.
At the same time, the amounts earned were not cosmic. As noted by Twitter user Ricefarmer in his investigation, Nate’s profit for his work “Spectrum Of A Ramenfication Theory” from the “Dailydust” collection was 1.25 ETH in 20 minutes. So he earned several thousand dollars.
Just 20 minutes later, Wallet B sells «Spectrum Of A Ramenfication Theory» for 1.5 Eth. a 1.25 Eth profit in just 20 minutes.
– ricefarmer.eth 🍚(@RiceFarmerNFT) September 15, 2021
Representatives of OpenSea in the company’s official blog stated that they «know about the fact of insider trading», but did not name the specific names of the suspects. It is reported that an investigation will be conducted inside OpenSea for manipulation in the auction, and the author of the operations has already quit. For an added layer of security, exchange management has now banned employees from buying and selling NFTs from collections advertised by the company. Accordingly, they can still purchase simply world-famous tokens like Cryptopunks.
We believe that the situation is unlikely to end tragically for Binance. Most likely, the matter will get by with layoffs – as happened with the example of OpenSea. Although this is another signal for users of such platforms, who need to be careful. It is possible that the cost of the purchased NFT token is artificially inflated, and some cunning trader did it.