Crypto Traders Make Big Money on Binance GNS Listing – Front or Smart Money? – Cryptopolite
On February 17th, a wallet previously accused of leading Binance’s token listings engaged in another transaction involving Gains (GNS) tokens just before they were listed on Binance.
Lookonchain’s study revealed that the anonymous crypto trader made over $100,000 in minutes after they bought a token right before it was listed on Binance.
After a thorough investigation, the on-chain scout revealed that just thirty minutes before it was listed on Binance, the trader bought $208,335 worth of Gains Network (GNS) tokens. After the IPO, GNS experienced a remarkable 51% increase, jumping from $7.92 to $12.01 – allowing the trader to turn their investment into over a hundred thousand dollars in profits in less than an hour.
Lookonchain jokingly referred to the trade as “smart money” in their Twitter post. Still, not many people find it funny – as insider trading is a legitimate practice in a number of countries such as the US and Canada, the European Union and other jurisdictions around the world. Generally, trading on undisclosed information, such as news regarding an impending IPO, can be considered unethical and can risk jeopardizing the fairness of the market.
Understanding front driving in crypto exchanges
In the case of cryptocurrencies, fronting occurs when a trader or exchange employee leverages the confidential information they possess about an investor’s trade to place the transaction in front of the customer. This results in undeserved profits being made at the expense of others.
Front-running gives insiders an unfair advantage over the market, as it also violates any trust or confidentiality that may exist between them and other involved parties. It is a form of dishonesty that allows certain individuals to take advantage of information that should remain confidential.
Over the past 12 months, many high-profile crypto exchanges have come under fire for alleged or confirmed cases of front-running. This is when insider traders take significant positions in digital tokens that are likely to increase in value due to being listed on a large centralized crypto exchange such as Binance.
Recently, former Coinbase Product Manager Ishan Wahi pleaded guilty to his part in an insider trading scheme that netted him a staggering $1.1 million. This case is notable as it is the first time federal prosecutors have encountered criminal activity involving digital currencies.
A comprehensive academic research report conducted in August 2022 revealed that around 10-20% of new crypto listings on CoinBase were potentially front-running.
Binance’s answer to front-running in crypto exchanges
In July, following accusations against Wahi, Binance CEO Changpeng Zhao ( CZ ) strongly criticized the behavior, stressing that insider trading and front-running are illegal whether they involve cryptocurrency or not.
Binance has established a self-regulation policy to prevent employees from engaging in short-term trading. However, Coinbase’s Wahi was found guilty of sharing inside information about upcoming tokens with his relatives.
During a recent AMA session, Changpeng Zhao declared that most leaks and front runs do not come from Binance, but come from the project/token side. To discourage anyone from attempting such behavior, Binance has adopted a strict blacklisting system on anyone engaged in this activity prior to being listed.
“At Binance, we strive not to disclose any information about listings on our exchange until necessary. However, sometimes project teams are aware that they are likely to be close to listing once the wallet integration is complete. To prevent a listing news from leaking out too soon, we are doing our best to keep team members informed while remaining discrete and discrete with other exchanges.”
Changpeng Zhao
