Binance Accused of Silencing Employee to Cover Up Illicit Trading

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Major cryptocurrency exchange Binance is facing allegations of firing an employee who reported potential market manipulation on the exchange.

Wall Street Journal (WSJ) reported the matter on May 9. It has intensified scrutiny of the exchange’s operations and raised concerns about its commitment to ensuring a fair trading environment.

According to WSJ, Binance axed the head of its market surveillance team for sounding the alarm on suspected market manipulation by DWF Labs.

DWF Labs is the global digital asset market maker and Web3 investment firm that trades in spot and derivatives markets on over 40 top exchanges, including Binance.

The allegations against DWF labs include pump-and-dump schemes and wash trading. These activities were flagged by the surveillance team, which comprised experts from traditional finance seeking to align Binance’s practices with regulatory standards.

The team’s investigations revealed that some high-profile clients were involved in these illicit trades, compromising the platform’s integrity. The whistleblower’s dismissal has raised questions about Binance’s commitment to regulatory compliance and transparency.

In response to this allegation, Binance denied any tolerance for market manipulation, stating that the platform has a robust surveillance framework to identify and address such abuses. The exchange said it had taken decisive actions against market makers in the past, offloading over 355,000 users whose activities were contrary to the platform’s terms of service.

Recall that the US Securities and Exchange Commission (SEC), in June 2023, filed a lawsuit against the exchange and its US subsidiary, Binance.US, over alleged violations such as operating as an unregistered exchange, insufficient controls over market manipulative trading, and commingling of funds.

This resulted in Binance agreeing to pay a $4.3 billion fine for breaching anti-money laundering standards. While the lawsuit also led to CZ’s resignation, the exchange promised to drive “unceasing efforts to deliver a safe and trusted platform,” which has now been tested by WSJ’s Binance allegation.

Meanwhile, CZ was recently sentenced to four months in jail for his involvement in the exchange’s violation of money sanctions. In addition to the prison sentence, Zhao agreed to pay a $50 million fine.

Binance Allegation Drives Suspension of US Licenses

Binance and CZ’s guilty plea to violating US anti-money laundering and sanction law has resulted in six states’ revocation of Binance.US licenses.

The Oregon Division of Financial Regulation announced on April 30 that it had revoked Binance.US’s operating license. This means the exchange is no longer permitted to accept money for transmission, hold funds, or facilitate the sale of fiat or cryptocurrency for consumers in the state.

The state’s financial watchdog explained that its decision is tied to the SEC and US DoJ’s previous allegations against Binance. This also prompted other states to take action to protect consumers and enforce compliance with financial regulations.

It could be recalled that the Florida Office of Financial Regulation issued an emergency suspension order against Binance.US’s money transmitter license on November 29, 2023, eight days after CZ’s guilty pleas on November 21.

Subsequently, on January 8, 2024, the state of Alaska denied the renewal of Binance.US’s license due to the US subsidiary’s 100% ownership. North Carolina halted its platform’s license on January 23, followed by Maine declining to renew it on January 29.