Report: Binance US rejects claims it engaged in wash trading

July 24, 2023 03:38 AM PDT | By Invezz

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Report: Binance US rejects claims it engaged in wash trading — Image source: Invezz

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Binance US, the entity owned by Changpeng Zhao (CZ), was rife with wash trading that inflated its volume. Wash trading is a phenomenon where a person or a group of people trades among themselves in a bid to manipulate an asset’s price.

According to the WSJ, CZ confirmed that the $70k worth of Bitcoin that exchanged hands on its first day came in the US came from its affiliated entities. The WSJ cited internal emails from the company.

The report came less than two months after the Securities and Exchange Commission (SEC) filed a wide-ranging lawsuit against Binance. One of the allegations was that Binance used Sigma Chain, a company owned by CZ to manipulate this volume. Binance has rejected these claims. In a statement, a representative said:

“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.”

Analysts believe that wash trading is rife in the crypto industry. A report by the Center for Economic Policy Research (CEPR) showed that over 70% of all reported volumes in unregulated exchanges were wash trades.

Wash trading is also rife in the non-fungible tokens (NFT) industry. Recent data showed that over $30 billion of NFT trading on Ethereum was wash trading.

Most importantly, wash trading was one of the top reasons why FTX collapsed. The company used Alameda Research, its hedge fund, to manipulate volume in FTX. Most importantly, Coinbase, a regulated exchange, was fined by the CFTC for wash trading it engaged in in 2016.

The post Report: Binance US rejects claims it engaged in wash trading appeared first on Invezz.

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