A group of unknown investors made significant profits using insider information about upcoming listings on the cryptocurrency exchanges Binance, Coinbase and FTX. The Wall Street Journal reported this, citing data from analytics company Argus.
Argus found 46 digital wallets that purchased Gnosis (GNO) tokens totaling $17.3 million in August 2021. Immediately after listing on the popular trading platforms, they sold the assets, generating revenue.
“The profits from token transactions seen on the blockchain were over $1.7 million. However, their true income is likely much higher, as some of the assets were transferred from wallets to exchanges rather than exchanged directly for stabelcoins,” according to Argus.
For example, one address invested $360,000 in GNO six days before the token was listed on Binance. After listing on the platform, the price of the asset skyrocketed – the investor liquidated the position, earning about $140,000 in revenue.
The company noted that insider trading-related addresses showed signs of activity through April 2022.
This is not the first time the issue of insider trading in the cryptocurrency market has come up. In April 2022, opinion leader Cobie discovered an address that invested “hundreds of thousands of dollars” in tokens on the Coinbase Asset Listing 24 hours before its publication.
Shortly thereafter, Coinbase CEO Brian Armstrong wrote:
“There is always the possibility that someone inside Coinbase, willingly or not, could leak information to third parties engaged in illegal activity. We do not tolerate this kind of thing and monitor these practices, conducting investigations when necessary.”
Last Thursday, Coinbase legal counsel Paul Grewal also acknowledged that sometimes unscrupulous traders manage to get hold of inside information about upcoming listings.
He stressed, however, that it’s not always about people leaking information – sometimes insiders get the data directly from the blockchain.
“For example, sometimes before an asset is listed, we have to test it in a way that is reflected in the blockchain. These signals are not obvious to most market participants, but are available to everyone and can be detected if someone looks hard enough,” he wrote.
Following the fresh WSJ publication, Binance CEO Changpeng Zhao said that his company has a “zero-tolerance policy” toward insider trading practices.
He said independent analysts have checked the wallets Argus mentioned – none of them are affiliated with anyone on the Binance team.
“That’s why we try not to disclose listing information even to project teams. But sometimes it can’t be completely avoided when we need technical help integrating wallets and so on,” Zhao wrote.