Binance has banned a market maker and seized its proceeds after an internal investigation revealed “misconduct” and “market irregularities.”
The market maker, which provided liquidity for GoPlus Security (GPS) and MyShell (SHELL), was found to have engaged in unspecified manipulative activities. The exchange has promised to compensate affected users using the confiscated funds.
Background
- Binance has banned a market maker and seized its proceeds over alleged misconduct.
- The entity was initially investigated for its role with GoPlus Security (GPS), and Binance later identified that it was also involved with MyShell (SHELL).
- Binance permanently banned the entity from conducting market-making activities on its platform.
- The exchange confiscated the market maker’s proceeds, stating that the funds would be used to compensate impacted users. The exact compensation details are yet to be announced by the respective projects.
- While Binance did not disclose the identity of the market maker, major firms such as GSR and Animoca Brands publicly denied any involvement.
- MyShell terminated its relationship with the banned market maker and confirmed that all remaining assets in its Binance accounts would be transferred to a new liquidity provider.
- MyShell also announced plans to buy back SHELL tokens over the next 90 days and publish wallet addresses to ensure full transparency.
Why should you pay attention?
- Binance’s action highlights ongoing concerns about transparency and market manipulation in crypto trading.
- Retail investors may have been impacted, and Binance has committed to compensating affected users.
- A growing number of projects are distancing themselves from the banned entity, raising questions about broader market practices in crypto trading.
- The incident revives older allegations about market makers engaging in questionable liquidity practices, potentially at the expense of retail traders.
Who said what?
- Binance confirmed its actions in an official statement, saying:
“We have identified the project MyShell (SHELL) using the same Market Maker. Due to the Market Maker’s misconduct, we have taken additional steps, including offboarding and confiscating proceeds for user compensation.”
- GSR, a known market maker, denied involvement, stating:
“We can confirm that we are not the market maker referenced in Binance’s statement regarding GoPlus Security and remain committed to upholding the highest standards of integrity and transparency with our clients.”
- Animoca Brands also distanced itself, saying:
“In response to queries, Animoca Brands wishes to clarify it is not involved in market-making activities for GoPlus Security ($GPS) and/or MyShell ($SHELL).”
- MyShell responded by cutting ties with the banned market maker, stating:
“All Binance accounts associated with the Market Maker have been suspended. All stablecoins the Market Maker sells will be fully used to buy back SHELL within 90 days.”
- An X user, AB Kuai.Dong, linked the event to past industry manipulation, commenting:
“The GoPlus and MyShell incident brings up an old story. There have been many cases of market makers using projects for financial gain under the guise of providing liquidity.”
Zooming out
- Market manipulation remains a major concern in crypto, with Binance’s action reinforcing ongoing regulatory and ethical concerns about liquidity providers.
- The controversy has led to greater scrutiny over market-making practices, raising questions about whether exchanges should impose stricter oversight on liquidity providers.
