Author: BlockBeats
On May 9th, The Wall Street Journal published another in-depth report on the cryptocurrency giant Binance. The article pointed out that in response to the SEC's investigation in 2022, Binance expanded its market surveillance team and hired more than ten investigators from US banks and hedge fund Citadel. However, they chose to ignore the suspicion of market manipulation by important VIP clients.
According to the report, Binance's surveillance team submitted a report recommending the ban of DWF Labs at the end of September last year, but the team leader was dismissed by the company. A new senior executive at Binance stated that the new investigation found insufficient evidence to suggest that DWF Labs engaged in market manipulation. The self-trades discovered by the surveillance team may have been unintentional and may not constitute manipulation on their own.
Members of Binance's surveillance team found that DWF Labs manipulated the prices of YGG and at least six other tokens, and conducted over $300 million in wash trades in 2023. According to some former company insiders, the investigation concluded that these actions violated the terms of use.
The team developed new software tools to track market manipulation and identify "wash trades" - where traders act as both buyers and sellers in the same transaction to create a false impression of market activity. The new technology made investigators aware of the potential scale of the problem, especially among VIP clients who rely on their business. Data shows that last year, the top traders with monthly trading volumes exceeding $100 million accounted for two-thirds of the total trading volume on the Binance platform.
Subsequently, DWF Labs responded on social media: "What we want to clarify is that many of the recent media allegations are unfounded and distorted the facts. DWF Labs upholds the highest integrity, transparency, and ethical standards, and we are always committed to supporting more than 700 partners in the entire cryptocurrency ecosystem."
Binance responded to the WSJ report, stating: "Binance strongly denies any claims that our market surveillance program allows market manipulation on our platform. We have a robust market supervision framework to identify market abuse and take action. Any user who violates our terms of use will be removed; we will not tolerate market abuse."
Rivals are Furious with DWF
The WSJ report mentioned that in August last year, after Binance launched high-leverage derivative contracts linked to the YGG token, its value soared fivefold. Grachev had previously promoted YGG on X, claiming that the listing would bring "sustainability and strength" to the token, but its price soon plummeted.
The price fluctuations caught the attention of two other market makers, who complained to Binance about DWF's trading. One market maker complained to Binance's VIP client department about DWF's trading, and Binance's team began investigating DWF in September last year. Binance's investigators found that DWF manipulated the price of the YGG token and at least six other tokens, and conducted over $300 million in wash trades in 2023.
Investigators found that after Grachev promoted YGG in a tweet, DWF sold nearly five million tokens in two batches near the peak, leading to a price collapse. Gabby Dizon, co-founder of YGG, said he was unaware of the investigation's findings.
Since its launch, DWF has been under the media spotlight, with several reports revealing details of DWF's operations to varying degrees.
Previously, after DWF Labs' related fund movements were released in the market, the three currencies YGG, DODO, and C98 experienced similar volatile market conditions. This further confirmed the speculation of market-making activities by DWF Labs for some institutions and investors. Projects related to DWF Labs' layout were turned into investment reference charts to improve the accuracy of predicting the next rising currency.
To attract more commercial clients, DWF Labs mentioned in its "Market Making" business that it "will provide efficient and sustainable liquidity for our partners." Therefore, the similar trends of the three currencies YGG, DODO, and C98, and even other market-making currencies, have precisely verified the business level and service quality of DWF Labs.
Related Readings:
《DWF Excluded by All Peers, GSR Directly States "Not Worthy to Stand with Other Market Makers"》
《Analysis of DWF's Business Logic, How to Use Relevant Information to Guide Secondary Trading?》
DWF Labs has been criticized by the outside world for its "VC + market maker" business model, which DWF Labs does not hide and directly displays on its official website.
In a previous report by The Block, an employee of DWF Labs presented a chart of the token price increase after a previous collaboration when seeking business. A source familiar with the matter stated that during a phone call with potential clients, if the other party showed hesitation, a senior executive of DWF Labs would mention the previous project's token price increase. It is reported that Andrei Grachev, a partner at DWF Labs, would inquire about how high the client wanted to raise the token price and discuss whether the company could achieve this goal.
Related Readings:
《The Block: Uncovering How Cryptocurrency Market Maker DWF Labs Rose to Prominence》
Despite the ongoing controversy surrounding DWF Labs, the company and its key figures have shown no signs of slowing down. In September last year, HTX (formerly Huobi) awarded DWF Labs the Best Partner award. Grachev recently posted a message on social media, stating that the company is undergoing an audit by one of the "Big Four" accounting firms, without specifying, and is obtaining multiple licenses. According to BlockBeats interviews, the company has applied for a Virtual Asset Service Provider license in the British Virgin Islands.
Grachev himself is not shy about flaunting his wealth or celebrating the company's success. Grachev once posted a photo of a Lamborghini with the DWF Labs logo on social media, and his other posts show that the company has been enhancing its image by hosting events in Istanbul and Hong Kong.
And the "friendly competitors" are not hiding their emotions towards DWF either. Last year, a forum at Token 2049 unexpectedly sparked a battle among cryptocurrency market makers. DWF Labs co-founder Andrei Grachev expressed gratitude for the invitation after the "Web3 Connect" forum, but market maker GSR angrily retorted on Twitter that DWF Labs is not qualified to sit with market makers GSR, Wintermute, and OKX at this forum, considering it an insult.
GSR stated, "It is very sad that at the end of 2023, bad actors like DWF Labs can still receive so much attention." Another market maker, Wintermute CEO Evgeny Gaevoy, also liked this tweet. Interestingly, in the event photo shared by market maker GSR, a portion featuring Andrei Grachev was conspicuously removed.
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