Insider Trading on Binance: A Profitable But Illegal Practice
Recently, a crypto trader engaged in front-running on Binance and made a $100,000 profit by purchasing and selling the Gains (GNS) token just before it was listed on the exchange.
The trader purchased GNS tokens worth $208,335 just 30 minutes before its listing on Binance, and after the listing, the token’s value increased by 51%, from $7.92 to $12.01. The trader then sold their tokens for a profit of $106,747 in less than an hour.
Then sold 26,881$GNS and got $315,082.
— Lookonchain (@lookonchain) February 17, 2023
Front-running, a practice that gives a trader or an exchange employee an unfair advantage in the market by using confidential information about a customer’s trade to place their trade before the customer’s transaction is executed, is a violation of trust and is considered illegal in most countries.
In a recent case, former Coinbase product manager Ishan Wahi pleaded guilty to participating in an insider trading scheme that generated $1.1 million in profits, making it the first insider trading case involving cryptocurrencies.
A recent academic research report found that 10-20% of new crypto listings on Coinbase were subject to front-running.
The CEO of Binance, Changpeng Zhao (CZ), has condemned insider trading and front-running, stating that they should be criminal offenses in any country, whether they involve cryptocurrencies or not.
Binance enforces a policy of self-regulation to prohibit employees from engaging in short-term trading. Anyone who tries to front-run on news that they will get listed on Binance will be put on a blacklist.
In conclusion, while front-running can result in significant profits, it is an illegal and unethical practice that can harm the integrity and fairness of the markets.
Crypto exchanges, including Binance and Coinbase, must continue to enforce strict regulations and punishments to deter front-running and insider trading.