Some of Binance.US’s first cryptocurrency transactions 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 traded during the first hour of operations in 2019. But according to an internal memo, Binance CEO Changpeng Zhao said of those trades, “That was us, I think.”
Aside from quoting that memo, the Wall Street Journal described the ongoing U.S. Securities and Exchange Commission (SEC) case against the company in a different way.
The SEC’s case raises similar allegations regarding wash trading, as it alleges that Binance.US inflated trading volumes through accounts held by companies controlled by Zhao, such as Sigma Chain. The Wall Street Journal highlighted part of the case where the SEC alleges that wash trading between Sigma Chain accounts and executive accounts accounted for 70% of a single cryptocurrency’s trading volume.
The SEC also said Binance.US had no trading oversight until at least February 2022. Memos between executives provided evidence of oversight, including a 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 period under review. That research did not report on Binance’s US arm due to the then-in-progress launch.
Binance denies allegations
The Wall Street Journal included Binance’s objections in its piece. It quoted a Binance spokesperson as saying that the company does not engage in or tolerate “wash trading.”
The spokesperson added:
“We believe that the allegations made by the SEC regarding wash trading are completely baseless and are based on a fundamental misunderstanding of the facts and misapplication of relevant law.”
That representative also said that Binance viewed the trades in question as “fully legitimate interactions” involving independent strategies. The spokesperson added that the size of trading activity does not necessarily affect the total trading volume.
Binance CEO Changpeng Zhao did not immediately comment on the Wall Street Journal article. He, however re-posted an article on FUD around the time of publication, implying that he disagrees with the content of the article.
Binance has recently criticized mainstream news sources for reporting on 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, not a particular behavior, has attracted these controversial reports.
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