WSJ exclusively exposed DWF's suspected market manipulation, with Binance involved.
Binance promises to prevent any suspicious trading activities, until they encounter a whale player who loves Lamborghinis.
Author: BlockBeats
On May 9th, The Wall Street Journal once again published an in-depth report on the cryptocurrency giant Binance. The article pointed out that in response to the SEC's investigation in 2022, Binance expanded its market surveillance team and hired over ten investigators from U.S. banks and hedge fund Citadel. However, they chose to ignore allegations of market manipulation involving important VIP clients.
According to reports, Binance's surveillance team submitted a report recommending the banning of DWF Labs in late September last year, but the team leader was fired by the company. A new executive at Binance stated that the new investigation found insufficient evidence to suggest that DWF Labs engaged in market manipulation. The self-trades discovered by the surveillance team may have been unintentional so-called self-trades, which alone may not constitute manipulation.
Members of Binance's surveillance team found that DWF Labs manipulated the prices of YGG and at least six other tokens, conducting over $300 million in wash trades in 2023. According to some former insiders, the investigation concluded that these actions violated the terms of use.
The team developed new software tools to track market manipulation and identify "wash trades" - where traders act as both buyers and sellers in the same transaction, creating a false impression of market activity. The new technology made investigators aware of the potential scale of the problem, especially among VIP clients who rely on their services. Data shows that last year, the top traders with monthly trading volumes exceeding $100 million accounted for two-thirds of the total trading volume on the Binance platform.
In response, DWF Labs stated on social media: "We want to clarify that many of the recent media allegations are unfounded and distort the facts. DWF Labs upholds the highest standards of integrity, transparency, and ethics, and we are committed to supporting you and over 700 partners in the entire crypto ecosystem."
Binance responded to the WSJ report, stating: "Binance strongly denies any claims that our market surveillance program allows market manipulation on our platform. We have a robust market supervision framework to identify market abuse and take action. Any user violating our terms of use will be removed; we do not tolerate market abuse."
Rivals Furious at DWF
The WSJ report mentioned that in August last year, after Binance launched high-leverage derivative contracts tied to the YGG token, its value surged fivefold. Grachev had previously hyped YGG on X, claiming that the listing would bring "sustainability and strength" to the token, but its price soon plummeted thereafter.
The price fluctuations caught the attention of two other market makers regarding DWF, who complained to Binance. One market maker company lodged a complaint with Binance's VIP client department about DWF's trades, leading Binance's team to start an investigation into DWF in September last year. Binance investigators found that DWF manipulated the price of the YGG token and at least six other tokens, conducting over $300 million in wash trades in 2023.
Investigators found that after Grachev promoted YGG in a tweet, DWF sold nearly five million tokens in two batches near the peak, causing a price collapse. YGG's co-founder Gabby Dizon stated that he was unaware of the investigation's results.
Since its debut, DWF Labs has been under the media spotlight, with several reports revealing various details of DWF's operations to different extents.
Prior to this, after news of DWF Labs' funding actions related to YGG, DODO, and C98 tokens hit the market, they experienced similar volatile trading patterns. This further confirmed speculations of market-making activities by DWF Labs for some institutions and investors. Projects related to DWF Labs' layout were turned into investment reference charts to increase the accuracy of predicting the next coin to surge.
To attract more commercial clients, DWF Labs mentioned in its "Market Making" business that it "will provide efficient and sustainable liquidity for our partners." Therefore, the price trends of YGG, DODO, C98, and even other previously market-made tokens have validated the business level and service quality of DWF Labs.
Related Readings:
"DWF Excluded by All Peers, GSR Directly States 'Not Worthy to Stand with Other Market Makers'"
"Analysis of DWF's Business Logic: How to Use Relevant Information to Guide Secondary Trading?"
DWF Labs has long been criticized by the public for its "VC + market maker" business model, which DWF Labs does not shy away from and directly advertises on its official website.
In a previous report by The Block, a DWF Labs employee, in pursuit of business, presented charts showing the rise in token prices after previous collaborations. A source familiar with the matter stated that during phone calls with potential clients, if there was hesitation, a senior executive at DWF Labs would mention the previous projects' token price increases. It is reported that DWF Labs' Managing Partner Andrei Grachev would ask clients how high they wanted the token price to rise and discuss whether the company could achieve this goal.
Related Readings:
"The Block: Uncovering How Cryptocurrency Market Maker DWF Labs Rose to Prominence"
"Conversation with DWF Labs: We Do Not Manipulate Anything"
Despite ongoing controversies surrounding DWF Labs, the company and its key figures show no signs of slowing down. In September last year, HTX (formerly Huobi) awarded DWF Labs the Best Partner Award. Grachev recently posted on social media that the company is undergoing an audit by one of the Big Four accounting firms, although unspecified, and is obtaining multiple licenses. According to BlockBeats interviews, the company has applied for a Virtual Asset Service Provider license in the British Virgin Islands.
Grachev himself does not shy away from flaunting his wealth or celebrating the company's success. Grachev once posted a photo of a Lamborghini with the DWF Labs logo on social media, and his other posts show that the company has been enhancing its image by hosting events in Istanbul and Hong Kong.
Meanwhile, the sentiments of "rival" companies towards DWF are clear. Last year, a forum at Token 2049 unexpectedly sparked a clash among cryptocurrency market makers. DWF Labs co-founder Andrei Grachev expressed gratitude in a tweet after the "Web3 Connect" forum. However, market maker GSR took to Twitter to angrily state that DWF Labs was not qualified to sit alongside market makers GSR, Wintermute, and OKX at the forum, considering it an insult.
GSR stated, "It is very sad that at the end of 2023, bad actors like DWF Labs can still attract so much attention." Another market maker, Wintermute CEO Evgeny Gaevoy, even liked this tweet. Interestingly, in the event photos shared by GSR, parts featuring Andrei Grachev were conspicuously removed.
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