Author: Fairy, ChainCatcher

Editor: TB, ChainCatcher

Liquidity is the lifeline that maintains price stability, and market makers are the guardians of this lifeline. However, what chaos ensues when the guardians turn into "predators"?

Twenty minutes after the GPS exchange went live, it fell below the opening price, plummeting 74% from a high of $0.15. SHELL dropped from $0.7 all the way down to $0.26. The price charts of the two tokens, GPS and SHELL, almost mirrored each other, as if manipulated by the same invisible hand.

With Binance's investigation and ongoing revelations from community users, this incident quickly became the talk of everyone's weekend. A hidden chain of interests gradually surfaced, with names like Web3Port, Whisper, and May Liu coming under scrutiny. The dark underbelly behind the crash was more shocking than imagined…

Price charts of GPS and SHELL

Market Maker's One-Sided Sell-Off Leads to Token Price Crash

Binance's announcement revealed that the recent abnormal price of GPS was directly caused by a certain market maker. This market maker conducted only sell operations within 21 hours, completely failing to fulfill its buying obligations, and sold off 70 million GPS tokens, profiting approximately $5 million. This sell-off led to a drastic price drop, nearly exhausting market liquidity.

Subsequently, Binance's investigation found that both crypto projects had entrusted the same market maker with their token liquidity management.

As a result, Binance delisted the market maker, prohibiting it from continuing market-making activities on the platform. At the same time, Binance confiscated the profits obtained by the market maker through illegal operations and plans to use these funds to compensate the affected users of the GPS and SHELL projects, with specific compensation plans to be announced by the project parties.

The Hidden Hand Emerges: The Complete Chain of Market Manipulation

As the incident escalated, the community quickly dug deeper, revealing the true face of the hidden hand. This incident not only exposed a market-manipulating market maker but also implicated a long-standing arbitrage chain active in the crypto space.

Crypto KOL @_FORAB revealed that the passive market maker for GPS and SHELL was GSR, while the active market maker was the Shanghai team Web3Port.

Further investigation found that Web3Port allocated tokens to its affiliated market maker Whisper, which obtained internal permission under Web3Port's Binance account to execute continuous sell operations, ultimately leading to the market crash. Multiple industry insiders confirmed that Web3Port and Whisper belong to the same team, forming a complete arbitrage chain from token acquisition to monetization.

May Liu and the "Arbitrage Assembly Line"

The long-term business operation model of Web3Port partner May Liu in the crypto space has come to light— from Spark Digital Capital to Web3Port, and then to Whisper, she has created an arbitrage assembly line specifically targeting project parties and exchanges.

• Spark Digital Capital Era (VC Disguise):
  May Liu was active in the crypto space under the guise of a VC institution, primarily engaging in market outsourcing and FA (financial advisory) services. She packaged projects to obtain free tokens, then lobbied other VC institutions to invest, turning these actual investors into "exit buyers," while she profited without any capital.
• Web3Port Incubator (Free Tokens for Services):
  After 2021 and 2022, as competition among VCs intensified, project parties became increasingly unwilling to provide tokens for free, challenging this arbitrage model. Therefore, May Liu established the Web3Port incubator, specifically serving early projects by providing packaging, guidance, and VC resource connections, in exchange for 1%-3% of free token shares.
• Whisper Market Maker (Monetization Outlet):
  Relying solely on free tokens was insufficient for arbitrage, so Web3Port also established Whisper as a market maker, ostensibly to provide liquidity for project parties, but in reality, it served as a monetization channel for "its own free tokens." Whisper, through internal authorization, could sell tokens on exchanges like Binance in large quantities, cashing out while retail investors became long-term "ATMs."

@_FORAB stated: "The so-called one-year fast track to Binance, to some extent, they indeed achieved it, and have been doing so for a long time."

Controversy Arises

Blaming the Market Maker Doesn't Hold Water

@yuyue_chris stated: "The project party is equivalent to a 'printing machine,' while the market maker is responsible for helping the project party cash out tokens and sharing profits according to the agreed ratio. Given this interest-binding relationship, the likelihood of the market maker unilaterally violating the project party's wishes and arbitrarily selling off large quantities is minimal."

@silverfang88 commented: "I believe the decision to crash the market was likely made jointly by the project and the market maker. In a sluggish market, the market maker might suggest the project party to sell early and not to be overly ambitious, as 'new coins on Binance always drop,' and the project party agreed, ultimately reaching a consensus that led to continuous sell-offs in the market.

On the other hand, the project party itself failed to attract enough buying interest, resulting in insufficient market depth, unable to withstand selling pressure or expand the order book, leading to sell orders dominating and prices continuously declining.

The Great Game discusses how past market makers on the NYSE exploited the open information of exchanges to manipulate the market and harvest retail investors."

@0xJamesXXX pointed out: "Another issue that everyone overlooks is that according to the tokenomics publicly disclosed by the project party, the tokens for investors/incubation institutions are still far from the unlocking time. But why does this institution have so many unlocked tokens available for sale? Is the project party deceiving investors? Or are they using other unlocked tokens, such as those given under the guise of airdrops?"

All Parties Seeking Profit, the Entire Interest Chain Needs Reflection

@forgivenever remarked: "The reason the market is in its current predicament is that the entire industry's interest chain is filled with wrongdoing from all parties, yet they pretend to be oblivious.

Blaming individual scapegoats does not help solve the problem. What truly needs reflection is how exchanges, VCs, project parties, KOLs, and market makers collectively contribute to the repeated harvesting of retail investors."

Regarding Binance's handling of this incident, there are many voices in the market:

@armonio_liang expressed: "If Binance's actions aim to reshape industry rules and promote the improvement of the exchange regulatory system, I support this. Looking back at the development of Wall Street, many regulatory systems originated from industry self-discipline to achieve a healthier market environment.

However, if this action is merely a campaign-style cleanup aimed at redistributing interests between institutions and ordinary investors, then the removal of market makers would be even more autocratic than traditional financial markets, making it hard to convince people.”

Supporters: Binance Purifying the Market Environment

“Kudos to Binance; if there are no costs for wrongdoing, even neutral parties will gradually lean towards evil.”

“Protecting user interests and cracking down on violations, Binance's actions are commendable. I hope other exchanges can follow suit to jointly maintain market order.”

“Binance demonstrates its commitment to the community and its pursuit of fairness in the industry.”

Opponents: Interfering with Market Free Competition

“While the approach is just, it is not very decentralized.”

“Binance's 'iron-fisted' rectification this time, is it to protect retail investors' interests, or is it aimed at further strengthening its control over the market? After all, the subtle relationship between exchanges and market makers is well-known in the industry, and Binance itself may not be able to stand outside this system.”

How to Resolve the Fog?

The turmoil triggered by the GoPlus and MyShell incidents has revealed deep-seated interests and regulatory gaps in the crypto industry. Blaming the market chaos on individual market makers oversimplifies the issue, neglecting the roles of exchanges, VCs, project parties, KOLs, and others in the interest chain.

So, who should be responsible for this "garbage market"?

Perhaps a more profound question is: what kind of rules and transparency does the cryptocurrency market need to truly achieve fairness and freedom? Should it rely on the "iron-fisted" rectification of centralized exchanges, or should it promote the implementation of decentralized governance? Should it allow the "wild" growth of the market, or introduce stricter regulatory frameworks?

In the future, it may only be an endless "Great Game"……

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