Trader Makes $100K in Seconds Front-Running Token Listing on Binance
An unidentified crypto trader made over $100,000 in profit after buying a token just minutes before it was listed on dominant crypto exchange Binance, according to analysis by on-chain sleuth Lookonchain.
The trader purchased $208,335 worth of Gains Network (GNS) tokens just 30 minutes before Binance listed the token on its global exchange. GNS soared some 51% just after the listing—from $7.92 to $12.01. The trader then offloaded their GNS position, scooping up $106,747 in profits in less than an hour.
Lookonchain referred to the exceptionally timed trade, perhaps cheekily, as “smart money.” If recent trends indicate anything, though, smarts may have nothing to do with it.
In the past year, multiple leading crypto exchanges have come under scrutiny for alleged—and in some cases, confirmed—instances of front-running: the practice of traders, armed with insider information, shoring up large positions of tokens that are all-but-certain to be boosted in value, and in this case, by a coveted listing on a centralized crypto exchange.
Earlier this month, Ishan Wahi, a former Coinbase product manager, pleaded guilty to participating in an insider trading scheme that reaped him $1.1 million in profits. The case was described by federal prosecutors as the first insider trading case involving cryptocurrencies.
When charges were first announced against Wahi in July, Binance CEO Changpeng Zhao condemned the Coinbase employee’s actions.
“Crypto or not, regulated or not, insider trading and front running should be criminal offenses in any country,” Zhao said.
Crypto or not, regulated or not, insider trading and front running should be criminal offenses in any country.
For anyone working in this industry, don’t do it.
Even if you just witnessed one, you may be in trouble later. Report it as early as you can. https://t.co/FmKWAV6b9c
— CZ 🔶 Binance (@cz_binance) July 21, 2022
But Binance itself may not be immune to such practices.
Late last month, Conor Grogan, Coinbase’s head of product, alleged numerous instances in the last year and a half of affiliated wallets consistently scooping up tokens moments before being listing on Binance, and making millions of dollars in profit in the process. Identified in those allegations, and a related story by The Wall Street Journal, was the same wallet address that profited off of today’s GNS listing.
It appears that there is a pattern of Binance front-running over 18+ months
I found connected wallets that:
-Bought $900k Rari seconds before and dumped minutes after listing
-Bought ~78K ERN between June 17 and June 21 and sold right after listing announcement
-Did same w/ TORN https://t.co/yAolrfeHkO pic.twitter.com/VRq3vzfcgd— Conor (@jconorgrogan) January 23, 2023
In other words, whoever executed today’s questionably timed trade did so with their wallet already in the public eye, which indicates the reality of how difficult it may be to stop such exploits, if they are in fact based on insider knowledge.
Binance claims that it institutes a self-governing policy of preventing employees from trading over short periods. But Coinbase’s Wahi, for instance, passed insider information about soon-to-be-listed tokens on to his brother and friend—a practice not technically barred by Binance’s internal policies.
Binance did not respond to Decrypt’s request for comment on the matter.
Unlike Coinbase, which is headquartered in the United States, many crypto exchanges including Binance conduct the majority of their global business outside of the jurisdiction of American regulators.
