The decentralized exchange (DEX) dYdX experienced a significant financial event on November 17, requiring the use of its insurance fund. The exchange had to cover $9 million worth of customer liquidations following a dramatic market fluctuation. Antonio Juliano, the creator of dYdX, labeled the event as a “targeted attack,” suggesting a deliberate attempt to destabilize the exchange’s financial stability.
Before November 17, the price of Yearn Finance (YFI) token surged by over 170%, only to plummet by 43% on the day of the incident. This abrupt price drop has raised concerns within the crypto community about potential market manipulation or even an exit scam. The focus of the alleged attack was on long positions in YFI tokens on the dYdX platform, leading to nearly $38 million in holdings being liquidated.
Juliano emphasized that the v3 insurance fund, despite the substantial payout, remains well-funded with $13.5 million. He reassured users that their funds were not impacted by the incident. In response to community concerns, dYdX announced that no user funds were affected and that an investigation is underway. Furthermore, dYdX is conducting a thorough review of its risk parameters and considering changes to both the v3 and potentially the dYdX Chain software to enhance security and prevent similar occurrences.
The crypto community has expressed alarm at the sudden market shift, with some speculating about insider involvement in manipulating the YFI market. Concerns were raised about the sufficiency of the remaining insurance fund and the steps dYdX is taking to prevent future attacks. There were claims that developers controlled multiple wallets holding a significant percentage of YFI tokens, though these claims were not conclusively backed by Etherscan data.
dYdX’s commitment to transparency in its investigation process is crucial in maintaining user trust. The team is collaborating with several partners to uncover the specifics of the incident and is expected to provide updates as new information emerges.
Recent market activities indicate a significant movement of LOOM tokens associated with Upbit, a well-known digital asset exchange. Over the past 48 hours, Upbit has escalated the frequency of depositing LOOM to other exchanges, Binance and Bithumb, summing up to over 120 transactions. This movement, involving approximately 19 million LOOM tokens (valued around $6.76 million), coincides with a 35% dip in LOOM’s price within the same timeframe, according to Scopescan.
A wallet affiliated with Upbit now reportedly holds a staggering 653 million LOOM, about 50% of the token’s total supply, valued at approximately $181 million2. Additionally, on a separate occasion, Upbit withdrew 11,081,386 LOOM, valued at $2.9 million, and the exchange’s total LOOM holdings now account for 49.45% of the token’s circulating supply.
The high concentration of LOOM tokens by Upbit and the recent massive transfers to Binance and Bithumb could potentially be influencing LOOM’s market liquidity and price stability. The substantial holding and movement of LOOM tokens hint at a possible market manipulation scenario, which might be a contributing factor to the observed price volatility. Over the last month, LOOM’s price surged over 1000%, increasing its market capitalization significantly before this recent dip4.
The pattern of LOOM token movement, especially between exchanges, warrants close monitoring by both regulatory authorities and market participants. The prevailing market conditions surrounding LOOM tokens, orchestrated by hefty transactions associated with Upbit, reflect a broader narrative of market dynamics in the burgeoning cryptocurrency domain.
LOOM is the native otken of Loom Network. Loom Network, based on Ethereum, serves as a platform for developers to build large-scale decentralized applications. Launched on October 1, 2017, it enhances smart contract computing power while reducing costs for certain tasks. By allowing interaction with off-chain third-party APIs, Loom enables developers to integrate their applications with external systems seamlessly without changing the programming language.
Utilizing Plasma for faster transactions, Loom addresses scalability issues prevalent in blockchain networks. It stands out by enabling Ethereum Solidity applications to run on side chains with tailored consensus mechanisms. The LOOM token, essential for membership, facilitates access to all apps on the network and the transfer of digital assets between Ethereum and Loom DAppChains. Through the zkLoom protocol, it leverages Ethereum’s security infrastructure, ensuring a secure, cost-effective blockchain environment.
On October 2, 2023, plaintiff Nir Lahav filed a class-action lawsuit in the District Court of Northern California against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., and CEO Changpeng Zhao. The lawsuit accuses Binance and Zhao of unfair competition and violations of Security Exchange Commission (SEC) laws. The plaintiff alleges that Binance’s actions were aimed at monopolizing the cryptocurrency trading platform market at the expense of competitor FTX.
The lawsuit is detailed, citing multiple instances of alleged misconduct. It claims that Binance intentionally acted to harm FTX by liquidating its holdings in FTX’s utility token, FTT, and then misleading the public about it. The suit also accuses Binance of bait-and-switch tactics, stating that Zhao tweeted about Binance’s intent to acquire FTX but retracted the statement a day later, causing market instability.
The Role of Social Media
Central to the lawsuit are tweets made by Zhao on November 6, 2022. In these tweets, Zhao announced the liquidation of Binance’s holdings in FTT. According to the lawsuit, this tweet was misleading because Binance had already liquidated its FTT holdings the day before. The tweet allegedly led to a 14% decline in FTT’s price within 24 hours, causing significant market disruption.
Zhao’s subsequent tweet about Binance’s intent to acquire FTX, only to retract it a day later, is also under scrutiny. The plaintiff claims that these actions were calculated to harm FTX and led to its “rushed and unprecedented collapse,” affecting thousands of traders and investors.
SEC’s Regulatory Framework
The lawsuit delves into the SEC’s role in regulating cryptocurrency trading platforms. It argues that the SEC’s broad definitions of securities are deliberately designed to capture new financial instruments, including cryptocurrencies. The suit cites the Howey Test, a legal standard used to determine what constitutes a security, as a basis for its allegations against Binance.
The plaintiff is seeking monetary damages, court costs, and disgorgement of ill-gotten gains. The lawsuit states that there are potentially thousands of class members affected by Binance’s actions. Both Binance and FTX are currently subject to SEC actions, adding another layer of complexity to the case. If the allegations are proven, it could set a precedent for how cryptocurrency exchanges are regulated and could potentially reshape the competitive landscape of the industry.
Creditors of Celsius Network have requested the help of a bankruptcy judge to investigate potential market manipulation of Celsius’ CEL token. The creditors, represented by a committee, are seeking information from cryptocurrency exchange FTX regarding users associated with 10 wallets that were allegedly involved in suspicious trades of the CEL coin between April and August 2022. The creditors suspect that the trades may have artificially inflated the price of the CEL token and want to determine if they were legitimate or constituted market manipulation, such as wash trading.
To identify the suspicious transactions, the committee employed the services of blockchain consultant Elementus. According to Elementus, 947 transactions involving a near one-to-one relationship of CEL token deposits and withdrawals occurred over three-day periods between 10 private wallets and 10 FTX-operated wallets. The committee believes that the information from FTX will be crucial in determining whether the trades were intended to inflate the price of CEL token artificially.
In addition to uncovering potential market manipulation, the committee is also requesting information regarding any short positions taken on CEL. The committee believes that short positions could have had a negative impact on the price of the CEL token, and that this information could also be critical in resolving a dispute related to Celsius’ bankruptcy.
The creditors are seeking permission from the bankruptcy judge to issue subpoenas to FTX to obtain the requested information. The request for subpoenas was made in court papers filed on April 26. The information obtained from FTX could be important in resolving disputes related to Celsius’ bankruptcy.
Meanwhile, FTX is pending approval from the United States Bankruptcy Court for the District of Delaware to sell LedgerX, its futures and options exchange and clearinghouse, to an affiliate of Miami International Holdings for approximately $50 million. The sale is expected to provide FTX with the funds needed to pay back its creditors. A hearing to approve the sale is scheduled for May 4.
In conclusion, the Celsius creditors’ request for subpoenas to FTX reflects their efforts to investigate potential market manipulation of the CEL token. The information obtained from FTX could be crucial in determining whether the trades involving CEL were legitimate or constituted market manipulation, and could be important in resolving disputes related to Celsius’ bankruptcy. Meanwhile, FTX’s pending sale of LedgerX is expected to provide the exchange with the funds needed to pay back its creditors.
The US Department of Justice (DOJ) has charged five individuals with conspiring to manipulate the market in relation to an alleged scheme involving the Hydro (HYDRO) token. The charges include conspiracy to commit securities price manipulation and wire fraud. The three individuals charged with manipulating the market for Hydro are Michael Ross Kane, the former CEO of Hydrogen Technology Corp.; Shane Hampton, Hydrogen’s chief of financial engineering; and George Wolvaardt. The other two individuals were charged separately for their alleged roles in the scheme. Tyler Ostern, the former CEO of Moonwalkers, and Andrew Chorlian, a blockchain engineer from Hydrogen Technology Corp., were also charged for their involvement in the alleged manipulation scheme.
According to the indictment, from June 2018 through April 2019, Kane, Hampton, and Wolvaardt defrauded market participants looking to trade the Hydro tokens that Hydrogen issued. Wolvaardt, who was the chief technology officer for a market-making firm called Moonwalkers Trading Limited, designed a trading bot that executed a number of high-value “spoof orders” at obscure intervals to make it appear as though there was high demand for the token. The bot also bought and sold large volumes of the token from the same account, a practice known as wash trading.
The alleged manipulation of the Hydro token price resulted in the co-conspirators making an approximate total of $2 million in ill-gotten profits. The DOJ claims that following the artificial manipulation of the token’s price, the co-conspirators sold large chunks of their holdings.
Kane, Hampton, and Wolvaardt have each been charged with one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud. If found guilty on all charges, they each face a maximum penalty of five years imprisonment in relation to the conspiracy to commit securities price manipulation charge and a staggering 20 years in prison on each of the other charges. Ostern and Chorlian have each been charged with one count of conspiracy to commit securities price manipulation and wire fraud. If found guilty, they face a maximum penalty of five years in prison.
In a separate case brought by the Securities and Exchange Commission, Hydrogen Technology Corporation and former CEO Michael Ross Kane were ordered to pay $2.8 million in remedies and civil penalties. On April 20, a New York District Court judge ruled against Hydrogen Technology Corporation and Kane in the case. The SEC alleged that Hydrogen and Kane had made false and misleading statements to investors about the company’s financial performance and the development of its technology.
In conclusion, the charges against the five individuals for market manipulation of the Hydro token highlight the importance of transparency and fairness in the cryptocurrency market. The DOJ’s efforts to prosecute individuals who engage in fraudulent activities in the cryptocurrency market sends a strong message that such activities will not be tolerated.
The United States Commodity Futures Trading Commission (CFTC) recently filed a lawsuit against Binance, one of the world’s largest cryptocurrency exchanges, and its CEO, Changpeng “CZ” Zhao, for alleged regulatory violations. In response to the allegations, CZ denied any market manipulation by Binance, but investors were quick to respond with a significant move of assets away from the exchange.
Within 24 hours of the lawsuit announcement, investors withdrew over 3,400 BTC from Binance, anticipating market fluctuations and seeking to lessen the potential impact of a Binance shutdown. The move by investors led to a reduction in Binance’s total Bitcoin balance, which was reduced by over 3,900 BTC in the past week. In contrast, competing exchanges such as Coinbase, Bitfinex, and Gemini saw an increase in BTC reserves during the same 24-hour timeframe.
While CZ maintains that Binance does not trade for profit or manipulate the market, recent episodes involving other crypto entrepreneurs, such as FTX’s Sam Bankman-Fried and Terraform Labs’ Do Kwon, have shaken investor confidence in the cryptocurrency ecosystem.
It is also worth noting that Bitcoin balances on major crypto exchanges have declined since March 20, with nearly 27,000 BTC leaving these exchanges over the past week. The reasons behind this trend are not entirely clear, but it may be due to a combination of factors, including increasing regulatory scrutiny and concerns about the overall cryptocurrency market.
Alongside the CFTC’s lawsuit against Binance and CZ, a federal judge temporarily halted a proposed deal between Voyager and Binance.US. This move indicates that regulators are taking a closer look at the cryptocurrency industry and may be ramping up their efforts to enforce existing regulations and prevent fraudulent activities.
Overall, the recent events surrounding Binance and the wider cryptocurrency market have raised concerns among investors and regulators alike. While the long-term impact of these developments remains to be seen, it is clear that the cryptocurrency industry is facing increased scrutiny and may need to adapt to evolving regulatory requirements to continue its growth and development.
It is the worst of times. It is the best of times. It is the age of fear, uncertainty, and doubt. Nevertheless, Bitcoin’s fundamentals remain intact. The project’s value is still there, despite the disastrous drop in price. It was all going so well. How did we get here? Actually, there are a lot of valid reasons. Let’s review all of the causes that lead to this FUD.
As you know, everything started through Elon Musk’s fingertips…
Tesla’s “Environmental Concerns”
When Bitcoin was on its way up, Elon’s company gave it the push it needed. Tesla announced ownership of $1.5B worth of Bitcoin that, apparently, remain on its balance sheet. The crypto community celebrated the move, profits followed. The coin’s legitimization seemed to take a step forward. And then…
5 BTC + 300 Free Spins for new players & 15 BTC + 35.000 Free Spins every month, only at mBitcasino. Play Now!
Inexplicably, Tesla announced they were discontinuing accepting BTC as a form payment. Despite wild speculation, no one knows what happened. In histweeted announcement, Elon cited “rapidly increasing use of fossil fuels for Bitcoin mining” as the reason. Few people inside the crypto community believed it. Everyone outside of it did. And even though Tesla clarifies they didn’t sell any of their Bitcoin, the FUD set in. And retail investors started selling.
If you want to learn aboutElon’s real views on the matterand about everything the crypto mining industry is doing regarding green energy, head over to Bitcoinist, our sister site.
Related Reading | Bitcoin TA: Here’s What Could Trigger A Bullish Reversal Above $40K
China’s Tightening Up Its Bitcoin Policies
This generated lots of FUD. The People’s Bank of China seemed to announce clear and unfavorable rules regarding cryptocurrencies.Yahoo Financereports:
“This is the latest chapter of China tightening the noose around crypto,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, a crypto lender.
Virtual currencies should not and cannot be used in the market because they’re not real currencies, according to a notice posted on the PBOC’s official WeChat account. Financial and payments institutions are not allowed to price products or services with virtual currency, the notice said.
Nevertheless, as with most things on this list, the announcement didn’t amount to anything specific yet.
BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
The US OCC Turns Its Eye To Cryptocurrencies
The newly announced Acting Comptroller of the Currency, Michael Hsu, revealed that the agency he presides, the Federal Reserve, and the FDIC are reviewing their policies on cryptocurrencies. This isn’t necessarily a bad thing, it might lead to clearer laws and stronger governmental support. Nevertheless, FUD doesn’t mind that fact. And FUD settled in.
Hsu’sstatement to the Committee Of Financial Services reads:
Shortly after I started, I requested a review of key regulatory standards and matters pending before the agency. Those items include the 2020 Community Reinvestment Act (CRA) final rule and associated NPR related to performance benchmarks, interpretative letters and guidance regarding cryptocurrencies and digital assets, and pending licensing decisions. For each, the review is considering a full range of internal and external views, the impact of changed circumstances, and a range of alternatives.
Binance Under Investigation
The US government turned its eye towards Binance. Apparently, blockchain investigator firm Chainalysis found a pattern that showed a considerably higher percentage of funds from criminal enterprises flowed through Binance, compared to other exchanges.Bitcoin Magazinereports:
The world’s largest cryptocurrency exchange, Binance, is under investigation by the U.S. Department of Justice and Internal Revenue Service (IRS), according to a report fromBloomberg.
“As part of the inquiry, officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business.”
Even though it’s just an inquiry and nothing might come of it, the FUD it generated within the community cannot be ignored.
Related Reading | Market Sentiment Hits Low As Binance Has Largest Bitcoin Inflow Ever
India almost bans cryptocurrencies
A total crypto prohibition was on the table once again, but India’s lawmakers turned the ship at the last minute. Word on the street is that they’ll pass clearer regulatory laws instead.The Economic Timesreports:
The central government may form a fresh panel of experts to study the possibility of regulatingcryptocurrency in India, three sources privy of the discussions told ET. This comes amid the prevailing view that the recommendations by a committee headed by former finance secretary Subhash Garg in 2019 for a blanket ban on these assets had become outdated.
This new rumor arrived yesterday, but the FUD that a total ban inspires was around for a while.
Is This A Coordinated Attack? Or Is The World Just Going Nuts?
We can’t confirm or deny this was a coordinated attack on Bitcoin. Maybe the upper class, transnational corporations, and high rollers of all kinds want to buy your BTC at a discount. Market manipulation is as old as markets. But, maybe, this perfect storm of bad news is what happens when the best performing asset that the world has ever seen takes over the world’s headlines. All eyes turn to it, and all fingers start poking.
However…
crypto vets pic.twitter.com/nsDzzLzMtv
— CMS Intern (@cmsintern) May 19, 2021
Featured Image by Jasmin Sessler on Unsplash - Charts by TradingView
While many U.S. crypto exchanges are using the latest bull run to spruce themselves up in hopes of impressing institutional investors and regulators, China’s so-called “Big Three” centralized crypto exchanges (CEX) – Binance, Huobi and OKEx – are slinging mud at each other.
The latest flap is over a bogus video that purports to show a single sell order of 21 million bitcoin on Binance on Jan. 4. The clip went viral last week on WeChat, a popular China-based social media platform.
A screenshot of the video viewed by CoinDesk highlighted a sell order of 21 million bitcoin at a price of $31,307.
The video, viewed by CoinDesk, claims that bitcoin’s price took a hit after the order was completed. Screenshots in a WeChat group’s chats show that some users appear to be furious, accusing Binance of “market manipulation.”
The angry reactions ignored the fact that the 21 million number alludes to the total amount of bitcoin that will ever be mined, sometime by the year 2140 (bitcoin’s total supply currently stands at 18.6 million). So clearly 21 million bitcoin could not have been sold. Besides, most major exchanges’ bitcoin reserve data are available to trace.
But because we’re nothing if not thorough, CoinDesk confirmed with several on-chain data firms, including CipherTrace and CryptoQuant, that no orders of that size were placed on Binance at the time the video purports to show.
A Binance executive spoke out about the video on WeChat, throwing shade at unnamed “competitors” he claimed were behind the video.
The video “could not be more fake,” Yi He, co-founder and chief marketing officer of Binance, wrote in Chinese on WeChat. “I was not going to respond because I thought nobody was going to believe it, but considering how ‘hard-working’ our competitors were to post it on every group chat, I just wanted to express my appreciation.”
A screenshot of Yi He’s response to the video on WeChat.
As of press time, Binance did not respond to CoinDesk’s requests for comment.
If you looked at English-language social media platforms, you would think the three China-originated centralized crypto exchanges coexist in peace and harmony. But a survey of Chinese-language platforms reveal a differing dynamic. Screenshots of chats and public posts on WeChat and other popular Chinese social media platforms such as Weibo show multiple disputes among the three exchanges over the past several years. This is not the first time Binance’s He has confronted executives from rivals OKEx and Huobi on social media.
He’s accusations notwithstanding, both Huobi and OKEx denied responsibility for the latest incident. Ciara Sun, vice president of global business at Huobi Group, denied Huobi was involved in “the creation of the video,” and told CoinDesk the video “falsely” recorded a sell order on Binance’s platform.
“As a global financial organization that adheres to both ethical and regulatory standards, we value honesty and transparency within our organization and do not rely on misleading marketing tactics that would erode the trust of our community,” Sun said.
Likewise, OKEx CEO Jay Hao told CoinDesk that crypto exchanges are often the victims of false accusations of “price manipulation.”
“Anyone with knowledge of this industry would immediately be able to dismiss a photo like this, but it’s unfortunate that some investors still suffer from these types of groundless and fictitious accusations,” Hao said.
It’s not just business, it’s personal
Normal business competition, centered on capturing market share in China, is only one part of the tensions involving the three exchanges. These hard feelings go back at least four years, when OKCoin’s then-CTO, Changpeng Zhao, and co-founder Yi He left what was at the time the largest Chinese crypto-to-fiat exchange to start Binance, according to Colin Wu, a China-based crypto writer who previously worked in the country’s crypto mining industry.
Meanwhile, OKCoin, along with other China-based bitcoin trading platforms, closed their trading operations in the country and moved offshore after Chinese regulators banned initial coin offerings in late 2017. OKEx has worked as a separate entity from its parent company OK Group or OKCoin since 2017, a spokesperson told CoinDesk previously. OKCoin now is a San Francisco-based crypto exchange, led by Chief Executive Hong Fang.
Huobi joined the fray slightly later and friction among the three exchanges really intensified after each launched crypto derivatives products. OKEx currently is the second-biggest derivatives exchange by bitcoin open interest, followed by Binance and Huobi. (The CME is the largest thanks to growing interest from institutional investors in the U.S.)
Several sources, who agreed to speak on the subject anonymously due to close business relationships with the three exchanges, told CoinDesk that as the competition heats up again there may be an uptick in tricks and false information such as the fake Binance video. In turn it can cause a lot of “fear, uncertainty and doubt” (FUD) among retail traders and investors in China, especially those who are relatively new to the market.
“The video came out at a time when retail sentiment was at the peak,” one source said. “When people are scared of the top, they could be easily aroused by anything like this.”
“No matter how much the cryptocurrency space has matured, there will always be interested parties from without who leap at the chance to cause FUD amongst traders,” OKEx’s Hao said.
