Binance covered market manipulation by DWF Labs

According to a report by the Wall Street Journal, Binance fired a member of its market-surveillance team after the team uncovered market manipulation by DWF Labs.

The unnamed former Binance insider claimed that the exchange’s investigators identified $300 million worth of wash trading by DWF Labs in 2023, involving cryptocurrencies including the Yield Guild Game (YGG) token.

The dismissal has raised concerns about the exchange’s commitment to combating market abuse amid regulatory scrutiny.

The fired employee, along with his team, was tasked with identifying and investigating suspicious trading activities. They reported that certain “VIP” clients, including those trading over $100 million per month, were engaged in prohibited practices such as pump-and-dump schemes and wash trading.

Despite these findings, Binance concluded that the evidence of market abuse by DWF Labs was insufficient. Shortly after the report was submitted, the head of the surveillance team was dismissed. Binance denied that it allows market manipulation, stating that the employee was let go following an investigation that found the allegations against DWF Labs were not “fully substantiated.”

On its part, DWF Labs defended itself on social media, arguing that the allegations were “unfounded and distort the facts.” Binance also reiterated its stance against market abuse in a separate post, noting its efforts over the past three years, including the offboarding of nearly 355,000 users involved in transactions totaling more than $2.5 trillion for violating its terms of use.

DWF Labs, a Web3 investment and market-making firm, has faced scrutiny over its trading practices but continues to deny any wrongdoing. Andrei Grachev, the co-founder of DWF Labs, has strongly refuted the market manipulation claims.

The allegations against DWF Labs first surfaced in September 2023 after unusual on-chain activity was noted by the cryptocurrency community. Wintermute, another algorithmic trading firm, accused DWF Labs of misrepresenting their market activities. Yoann Turpin, co-founder of Wintermute, criticized DWF Labs during an interview at Token2049, arguing that they mislabel what are essentially over-the-counter trades as investments.