Binance reacts to accusation of insider trading

The crypto space is one that is never in shortage of talks, trends and controversies. This is because it is a complex environment with lots of dynamics. Binance, the top crypto exchange is in the middle of another issue which related to events surrounding the listing of a meme coin BOME. The listing happened few days ago.

Some members of the crypto space once again accused Binance or its staff of Insider trading regarding the listing of BOME. In this case, a whale performed a huge purchase transaction of the BOME coin on Raydium just moments before it was listed on Binance. The purchase was in excess of 300m BOME tokens which was sold at a really low price of around $0.00739. The price of the token soared significantly after listing, making the purchase to worth more than 3 times the purchase value.

Members of the crypto community quickly spotted the trade as arranged and accused Binance or its staff of using insider knowledge to perform the transaction ahead of the listing. However, Binance has denied the allegations and clarified that the trader was not part of its staff. Here is a detail of what Binance has to say on this.

Binance denies being involved in alleged insider trading of BOME

Once Binance became aware of this allegation, they conducted an internal investigation quickly and reached out to the public about the matter. The investigation concluded and no staff of Binance was found guilty of the offense. So basically, Binance has denied that none of its staff is involved in that alleged business.

In addition to making their stand clear on the matter, Binance also offered a bounty for anyone that could prove that its staff is getting involved in insider trading or any other forms of crypto fraud. The amount to be paid for bringing such valuable information or reports ranges from $100k - $5m. Members of the public are invited to reach out to Binance through email if they have such facts.

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Why is insider trading Harmful to the crypto community?

Insider trading happens when someone from a project team, crypto exchange or other internal staff performs a trade based on the knowledge they have which the general crypto community does not have. Such a person takes advantage of their position and of holding exclusive knowledge to perform a trade which gives them more profit because of the timing. A typical example is the above Binance case assuming it was true. If a Binance staff performed the trade ahead of listing of the token, they gained unduly from the purchase as the token price soars after listing.

Insider trading is frowned upon across the crypto space and viewed as fraud which could lead to litigations. Investors and crypto traders always avoid markets that are accused of insider trading because there is no fairness to everyone participating. Those that trade because they have privileged access to information gains while the rest might loose their investment. Since no one likes to be taken advantage of, insider trading scares investors aware and this really affects how much liquidity is in the market.

Another challenge created by insider trading is that it becomes really hard for investors to know the real value of an asset or project. Once the trades are done which are often of massive volumes, the asset price might go up massively. This could be misleading if anyone invests based on the inflated value. Often, the price of such asset will floor after listing when the insider trades simply dumps the tokens into the market for profit.

The above and many reasons are why exchanges like Binance do not treat allegations of insider trading lightly. They take it serious. For one not to be a victim of insider trading, it is always best to do your own research before investing in any project. When you learn about the team and other people that are part of the project, it becomes easy to invest based on knowledge. And while insider trading could happen anywhere, its best to participate in token listing events in established exchanges.