The world's largest cryptocurrency exchange may have used inside information

The largest cryptocurrency exchange in the world by market value, Binance is allegedly being investigated in the US for the crimes of market manipulation and the use of inside information to trade assets. Brokerage clients buy and sell digital tokens daily — trades are worth tens of billions of dollars and do not go through regulatory authorities.

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According to a Bloomberg report, American authorities have expanded the work fronts to investigate the company’s performance beyond the offering of unregistered securities. This activity allegedly includes the use of customer data to fraudulently trade cryptoactives.

Image: Reproduction/Unsplash/Executium

The Commodity Future Trading Commission (CFTC), which oversees the market there, is looking for witnesses to confirm that Binance or its employees would have traded in a hidden way, before executing customer orders. With that, they would have taken advantage of the movement before it happened.

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Investigators suspect that Binance it would be easy to access millions of customer transactions — a competitive advantage in the market in which it operates. For now, the CFTC has not issued a statement on the alleged investigation.

In a statement, Binance says it has a “zero tolerance policy for insider trading and a strict code of ethics.” Even so, he doesn’t deny the accusations. According to the company, its internal process identifies and holds those who use their positions to act against the interests of customers accountable.

Accusation on Twitter

A month ago, an anonymous Twitter profile introduced himself as a former employee of the brokerage and accused her of liquidating operators on purpose. This occurs when the market moves in the opposite direction of the trader’s bet and erodes the collateral deposited in the account.

At the time, he said that the company used to artificially change prices to liquidate traders and , thus, stick with the guarantees. The company denies the accusations and says it is going to court against the complainant.

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Image: Reproduction/Unsplash/Executium

In May this year, the Department of Justice (DoJ) and the Internal Revenue Service (IRS), American agency equivalent to the Brazilian Federal Revenue, began to investigate Binance. The objective is to investigate crimes of money laundering and tax evasion.

The entities suspect that the broker’s users would use cryptocurrencies to hide money coming from illegal activities (such as drug trafficking). The company, however, was not formally accused of committing a crime.

The company is preparing to adapt to the compliance rules in order to be able to go public in the US. The idea is to capture more than Coinbase, the first cryptocurrency brokerage to appear on the New York Stock Exchange (NYSE). To do so, it is even willing to opt for a traditional hierarchical model with physical headquarters — as this is much more appealing to regulators.

Source: Bloomberg, Reuters

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