Index – Economy – Another dark shadow casts on cryptocurrencies

In August last year, a Gnosis coin worth $ 360,000 (HUF 125 million at the then exchange rate) was accumulated in six days in a crypt wallet. On the seventh day, Binance, the world’s largest-volume cryptocurrency, announced in a blog post that it would list Gnosis, allowing it to trade between users.

Listing tokens simultaneously increases liquidity and token legitimacy, and the move often boosts the trading price of the token. The price of Gnosis has risen sharply, from $ 300 to $ 410 in an hour. Its trading value jumped more than seven times its seven-day average that day.

Four minutes after the announcement of Binance, the accumulator began selling his tokens and cashed in just over four hours for just over $ 500,000, making a profit of about $ 140,000 and a return of roughly 40 percent, according to an analysis by Argus. which company offers companies software that they can use to manage employee trade. Similar patterns were identified for other tokens from the same cryptographic wallet: accumulation and then quick sale after listing.

And the formula based on that is that the person had accurate information about when Binance will pick up each token. So he did insider trading.

The crypto ecosystem is increasingly struggling with problems that the traditional financial world has been tackling for decades. One stablecoin per week (i.e. a crypt whose exchange rate is pegged to the value of another asset) exchange rate is tornbecause it turned out that there was not as much cash cover behind it as the issuers claimed. Meanwhile, the price of popular bitcoin also plummeted.

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There is also insider trading on the stock exchanges, but they are controlled there

How cryptographic exchanges prevent the leakage of market-sensitive information is becoming an increasingly important issue. The focus is on regulators raising questions about the fairness of the market, fearing small investors who are drawn into the world of cryptocurrencies in hopes of big profits but don’t have enough information to lose a lot of money to speculators and insiders.

And the fact that the Gnosis case is not an individual case is well illustrated by the fact that the WSJ Argus found a total of 46 cryptocurrencies that bought tokens worth a total of $ 17.3 million before they began listing on Coinbase, Binance and FTX shortly afterwards. Wallet owners cannot be determined through the public blockchain.

Profits from the sale of tokens on the blockchain totaled more than $ 1.7 million. However, the real gains from trading are likely to be much higher, as more of the stakes were transferred from the wallets to the stock exchanges rather than exchanged directly for stablecoin or other currencies.

This type of insider trading also occurs on stock exchanges, but it is watched by various regulators and supervisory bodies. If they see an irregularity, the perpetrators will be prosecuted and face severe punishment. However, cryptocurrencies are unregulated for the time being. It is no coincidence that more and more central banks and supervisors around the world are saying that the market needs to be tightened. The President of the European Central Bank, Christine Lagarde, is on Saturday promised steps.

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Maybe there will be the culprit, but the money will never

Argus focused only on portfolios that had a recurring pattern of buying tokens before the announcement of the IPO and then selling shortly thereafter. The analysis identified trading activity from February 2021 to April this year. The analyst firm could no longer trace the further fate of the money gained from the trick.

Coinbase, Binance and FTX have all said they have a compliance policy that prohibits employees from trading in privileged information. The latter two said they had reviewed the analysis and found that the trading activity reported in the Argus report did not violate their policies. A Binance spokesman also said none of the wallet addresses were tied to its employees.

“There’s always the possibility of someone inside Coinbase voluntarily or unintentionally leaking information to outsiders engaging in illegal activity,” wrote Brian Armstrong, CEO of Coinbase last month. According to him, the stock market is investigating employees who appear to be related to those who may be involved in a similar activity called front-running in cryptographic jargon. If someone is found to be involved in such a case, they will be fired.

If someone did the same in stock trading, they could expect a much tougher penalty: insider trading laws worldwide prohibit investors from trading in stocks or commodities based on relevant, non-public information, such as information about an upcoming listing or merger offer.

(Cover image: Moe Zoyari / Bloomberg / Getty Images)

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