Binance, the largest cryptocurrency exchange in the world by trading volume, has fired back at the United States Securities and Exchange Commission (SEC) over wash trading allegations. The exchange says the regulator’s claims are false due to its misinterpretation of facts.
Binance.US Says There Was Never Any Wash Trading
On June 5, 2023, the SEC sued Binance for violating various securities laws. As part of the suit, the Commission had accused the exchange of wash trading. It claimed that one notable wash-trader on the site was market maker Sigma Chain, a trading firm owned by and controlled by Binance’s CEO Changpeng ‘CZ’ Zhao. Following this, Binance.US, the US arm of the crypto exchange has vehemently denied these allegations.
“We strongly believe that the SEC’s allegations regarding wash trading are entirely unfounded, and based on a fundamental misunderstanding of the facts and a misapplication of the relevant law,” a spokeswoman for Binance.US said.
According to the spokeswoman for Binance, neither the company nor CZ engaged in or were receptive to the idea of wash trading.
However, there is reason to believe that these allegations aren’t unfounded, as a report from the Wall Street Journal suggests there may be some truth in the SEC’s allegations. According to the report, almost $70,000 worth of bitcoin was traded in the first hour of Binance’s launch in 2019. And in an internal message viewed by The Wall Street Journal, Binance’s CEO CZ allegedly admits these trading activities came from them as he says, “That was ourself, I think’” in the message.
Why The Wash Trading Allegations Are Severe
For more insight to wash trading, it is basically when an entity sells and buys the same asset to manipulate the market to its benefit. Doing this will increase the trading volume and massively drive up a commodity’s price as it gives the impression that it is in high demand.
Wash trading has always been a cause for concern in the financial world as it is a form of market manipulation which can be misleading to other investors. In this case, if truly Binance was involved in wash trading, it probably did this to increase its trading volume and give traders the impression that there was enough liquidity on the platform despite being new in the market.
At the time, Binance.US already had to compete with the likes of Coinbase and the defunct FTX for the US market and this would have helped to convince traders that they would not have a hard time executing their buy and sell orders.
To show its severity, wash trading in most asset classes has always been outlawed since the enactment of the Commodity Exchange Act (CEA) in 1936. But there seem to be some grey areas in the cryptocurrency world due to its ‘technical’ nature and regulators are still trying to grasp the workings of the industry.
However, considering the transparent nature of blockchain technology and with the right forensic tools and strategies, there is no doubt that it will become increasingly hard for exchanges and market makers to engage in this illicit activity as regulators ramp up oversight of the crypto industry.
You can get bonuses upto $100 FREE BONUS when you:
💰 Install these recommended apps:
💲 SocialGood - 100% Crypto Back on Everyday Shopping
💲 xPortal - The DeFi For The Next Billion
💲 CryptoTab Browser - Lightweight, fast, and ready to mine!
💰 Register on these recommended exchanges:
🟡 Binance🟡 Bitfinex🟡 Bitmart🟡 Bittrex🟡 Bitget
🟡 CoinEx🟡 Crypto.com🟡 Gate.io🟡 Huobi🟡 Kucoin.
Comments