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Crypto industry faces a boom in insider trading

Crypto industry faces a boom in insider trading

Analysts have noticed that some cryptocurrency wallets purchase tokens a few days before the listing and sell them once they appear on the exchange.

According to the Wall Street Journal, such activities are common on most major exchanges, including Binance, Coinbase, and FTX. Usually, the token goes up in value after being listed on a major exchange. So, in August, one wallet accumulated $360,000 worth of Gnosis coins in six days. On the seventh day, Binance announced the listing of Gnosis on its platform, driving the token price up more than 7 times. The wallet started selling tokens four minutes after Binance announced the listing and got rid of all tokens within 24 hours. By doing so, the investor earned $500,000, making a profit of about $140,000. Analysis reveals that it wasn't the first time this wallet bought up tokens before listing on a major exchange and then sold them.

Argus found that 46 wallets purchased $17.3 million worth of cryptocurrency shortly before the tokens appeared on the three major exchanges. However, the identity of the owners remains unknown. The detected profit from token sales was more than $1.7 million, but the actual profit is probably even higher. 

Regulators say such activity causes negative consequences for retail investors, but so far, there is nothing they can do to eliminate such practices.

The exchanges mentioned in the analysis deny their employees use insider information to trade. They pointed out that their policies prohibit employees from purchasing tokens in case they possess confidential information.

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