Home Regulation First trades at Binance.US involved wash trading, WSJ alleges based on CZ memo

First trades at Binance.US involved wash trading, WSJ alleges based on CZ memo

First trades at Binance.US involved wash trading, WSJ alleges based on CZ memo


Some of Binance.US’ first cryptocurrency trades were conducted internally and constituted wash trading, the Wall Street Journal said on July 24.

The Journal said that Binance.US saw $70,000 worth of Bitcoin trading over its first hour of operations in 2019. But according to an internal memo, Binance CEO Changpeng Zhao said regarding those trades: “That was ourself, I think.”

Apart from quoting that memo, the Wall Street Journal otherwise described the U.S. Securities and Exchange Commission (SEC)’s ongoing case against the company.

The SEC’s case makes similar accusations concerning wash trading, as it alleges that Binance.US inflated trading volumes through accounts at companies controlled by Zhao such as Sigma Chain. The Wall Street Journal highlighted a section of the case in which the SEC alleges that wash trading between Sigma Chain accounts and executive accounts accounted for 70% of one cryptocurrency’s trading volume.

The SEC also said that Binance.US had no trading surveillance in place until at least February 2022. Memos between executives provided evidence of oversight, including one document in which executives told former Binance.US CEO Catherine Coley that no action would be taken against self-trading without regulatory pressure.

The Journal also suggested that, based on a 2019 study, wash trading accounted for more than 46% of the volume of Binance’s global arm during the surveyed time period. That survey did not report on Binance’s U.S. arm due to its then-ongoing launch.

Binance denies allegations

The Wall Street Journal included Binance’s objections in its piece. It quoted a Binance spokesperson, who said the firm does not “engage in or tolerate” wash trading.

The spokesperson added:

“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.”

That representative also said that Binance viewed the trading in question as “entirely legitimate interactions” which involved independent strategies. The spokesperson added that the size of the trading activity did not necessarily impact overall trading volume.

Binance CEO Changpeng Zhao has not directly responded to the Wall Street Journal article. However, he re-posted an article on FUD around the time of its publication, which implies that he does not agree with the content of the article.

Binance has recently criticized mainstream news sources over coverage of topics such as executive departures, intercompany transactions, and alleged ties to China.

On May 29, Zhao suggested that Binance’s status as the world’s largest crypto exchange, and not any particular behavior, has attracted those controversial reports.

The post First trades at Binance.US involved wash trading, WSJ alleges based on CZ memo appeared first on CryptoSlate.


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