In January, the brother of a former Coinbase product manager was sentenced to 10 months in prison for wire fraud conspiracy in what prosecutors called the first case of insider trading involving cryptocurrencies. In September 2022, Nikhil Wahi entered a guilty plea for executing trades based on private data obtained from his brother, Ishan Wahi, a former product manager for Coinbase.
Most countries have laws against insider trading, which carry stiff penalties like jail time and heavy fines. The recent insider trading investigation against crypto exchanges by the United States Securities and Exchange Commission indicates that regulatory bodies are prepared to stop financial misconduct in crypto marketplaces.
Without clear regulation, many have questioned whether other exchanges and platforms have similar rogue employees participating in illegal trades.
Prosecutors raised a similar case against an OpenSea executive in a lawsuit filed in October 2022, with concerns growing in the wake of the FTX collapse and the alleged misconduct of its executives.
Binance listings-related token dumps became a hot topic weeks after the first insider trading conviction. Conor Grogan, a director of Coinbase, used Twitter to draw attention to the recent transaction activities of a few anonymous wallets. The unidentified wallets allegedly purchased several unlisted tokens minutes before Binance announced their listing and sold them as soon as the announcement was made public.
These wallets have made hundreds of thousands of dollars off price spikes in new tokens listed on Binance. The trade’s accuracy suggests that the wallet owners have access to intimate knowledge about these listings. According to Grogan, this could potentially be the work of a “rogue employee related to the listings team who would have information on fresh asset announcements or a trader who discovered some sort of API or staging/test trade exchange leak.”
Binance recently announced a 90-day token sale policy for employees and family members to fight insider trading. The policy prohibits the sale of any newly listed token on the exchange within the mentioned time frame. A spokesperson for the crypto exchange told Cointelegraph that it has a zero-tolerance policy for any employees using insider information for profit and adheres to a strict ethical code related to any behavior that could harm customers or the industry.
“At Binance, we have the industry’s leading cybersecurity and digital…
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