- A former Binance insider claims the exchange uncovered $300 million in DWF Labs laundering operations, the Wall Street Journal reported.
- Binance later determined that there was insufficient evidence that DWF was involved in market abuse.
- It is the latest case of a crypto market maker accused of foul play.
DWF Labs has been identified among companies accused of engaging in pump-and-dump and market manipulation schemes on cryptocurrency exchange Binance last year, according to a report from the Wall Street Journal Thursday.
A former Binance insider claimed that the exchange's investigations team uncovered $300 million in laundering operations by DWF Labs, concluding that the company's actions were violations of the exchange's terms of use.
Wash trading refers to the simultaneous buying and selling of the same asset to create a false impression of market activity.
DWF Labs has rejected the allegations. "It's a competition-driven FUD," said Heng Yu Lee, founding partner of DWF Labs. DL Newsusing the acronym fear, uncertainty and doubt.
According to the WSJ reportThe allegations arise from complaints about DWF made by rival market-making companies.
They also come as Binance seeks to clean up its act after its founder, Changpeng Zhao, pleaded guilty late last year to violating anti-money laundering laws and violating sanctions.
DWF Labs calls itself a digital asset market maker. Crypto projects employ market makers to ensure their tokens are liquid on exchanges, minimizing price volatility and offering better prices for buyers and sellers.
But the creation of crypto markets is mired in controversy, with numerous accusations of dirty game aimed at the companies involved.
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DWF case divides Binance
The team that investigated DWF Labs had been hired from the world of traditional finance to help clean up Binance's act, according to the The Wall Street Journal report.
In September, Binance's research team began investigating DWF after two other market-making firms raised concerns privately.
"Binance investigators found that DWF manipulated the price of YGG and at least six other tokens, and made more than $300 million in laundering operations in 2023," the Diary saying. YGG is the native token of a decentralized autonomous organization, or DAO, Yield Guild Games.
But after the Binance research team presented its findings, something strange happened.
The head of Binance's VIP customer department reportedly disputed the findings and complained to the company's management. After further investigation, the exchange determined that there was insufficient evidence that DWF engaged in market abuse.
Binance, the executive told the newspaper, considered that the head of the surveillance team had collaborated too closely on the case with one of DWF's competitors who filed the original complaints.
The head of the Binance investigation was fired a week after reporting the findings of the DWF investigation.
Market Makers Fight
Other crypto market makers previously reported DWF Labs, but have not directly accused the company of wrongdoing.
In September, around the time two unknown market makers complained about DWF Labs to Binance, Cristian Gil, president of market maker GSR, saying It was “insulting” that DWF Labs CEO Andrei Grachev had been invited to a panel with other market makers at the Token2049 conference.
"It's very sad that at the end of 2023, bad actors like DWF Labs can still get so much air time," Gil said.
Evgeny Gaevoy, CEO of market maker Wintermute, has also accused DWF Labs and Grachev of incorrectly classifying their business activities as investments.
Grachev denied accusations of market manipulation in September. interview with Blockbeats. "We are not involved in any manipulation," he said.
Wintermute has also not escaped scrutiny for its market-making practices.
In June, a class action lawsuit against defunct cryptocurrency lender Celsius alleged that Wintermute helped prop up the value of Celsius' CEL token through its market-making activities. He specifically accused the company of laundering the trade.
Wintermute has denied these accusations.
“All we try to do is display offers on screen, which is basically our core business. And that's it, basically,” Gaevoy said. DL News in an August interview.
Tim Craig is a DeFi correspondent at DL News. Do you have advice? Send an email to tim@dlnews.com.
