WSJ exclusively exposes DWF’s suspected market manipulation, Binance is involved

On May 9, The Wall Street Journal once again published an in-depth report on the crypto giant Binance. The article pointed out that in response to the SEC's investigation in 2022, Binance expanded its market monitoring team and hired more than a dozen investigators from Bank of America and hedge fund Citadel, but chose to ignore it after discovering that important VIP customers were suspected of market manipulation.

According to reports, the Binance monitoring team submitted a report recommending the ban of DWF Labs in late September last year, but the team leader was fired by the company. A new executive at Binance said that the new investigation determined that there was insufficient evidence that DWF Labs was engaged in market manipulation. The self-trading discovered by the monitoring team may be unintentional so-called self-trades, which alone may not constitute manipulation.

Binance monitoring team personnel found that DWF Labs manipulated the price of YGG and at least six other tokens and conducted more than $300 million in false transactions (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 detect "back-to-back transactions" - that is, traders play buyers and sellers in the same transaction to create the illusion of active markets. New technologies made investigators aware of the potential scale of the problem, especially among VIP customers who rely on their business. Data shows that last year on the Binance platform, top traders with monthly trading volume of more than $100 million accounted for two-thirds of the total trading volume.

DWF Labs later responded on social media: “We would like to clarify that many of the allegations reported in the media recently are unfounded and distort the facts. DWF Labs upholds the highest standards of integrity, transparency and ethics, and we remain committed to supporting you and more than 700 partners across the crypto ecosystem.”

Binance responded to the WSJ report: “Binance strongly denies any claim that its market monitoring program allows market manipulation on our platform. We have a strong market surveillance framework that can identify and take action against market abuse. Any user who violates our terms of use will be removed; we will not tolerate market abuse.”

Friends have been angry about DWF for a long time

The WSJ report mentioned that in August last year, after Binance launched a high-leverage derivative contract linked to the YGG token, its value soared fivefold. Grachev once again touted YGG on X and claimed that the listing would bring "sustainability and strength" to the token, but its price plummeted shortly thereafter.

The price fluctuations of the currency attracted the attention of two other market makers to DWF and filed complaints with Binance. One of the market maker companies complained about DWF's transactions to Binance's department that handles VIP customers. The Binance team then began an investigation into DWF in September last year. Binance investigators found that DWF manipulated the price of YGG tokens and at least six other tokens and conducted more than $300 million in wash trades in 2023.

Investigators found that after Grachev's tweet promoting YGG was released, DWF sold nearly five million tokens in two batches near the peak, causing the price to collapse. Gabby Dizon, co-founder of YGG, said he was unaware of the results of the investigation.

DWF has been in the media spotlight since its launch, and many previous reports have revealed the details of DWF's operations to varying degrees.

Previously, YGG, DODO, and C98 currencies experienced a sharp rise and fall after the market released news of DWF Labs' related fund movements. This further confirmed the previous speculation of some institutions and investors that DWF Labs had repeatedly engaged in market-making behavior. For this reason, the projects laid out by DWF Labs were made into investment reference maps to increase the hit rate of betting on the next currency to rise.

In order to attract more commercial clients and project parties, DWF Labs mentioned in the "Market Making" business that "it will provide efficient and sustainable liquidity for our partners." Therefore, the similar trends of YGG, DODO, C98 and other previously market-making currencies just verify the business level and service quality of DWF Labs.

Related reading:

《Behind the surge and plunge of GameFi guild leader YGG: DWF and the wild growth of cryptocurrency market makers》

《LD Capital: Disassembling DWF’s business logic, how to use information to guide secondary market transactions? 》

DWF Labs has been criticized by the outside world for its "VC+market maker" business model. DWF Labs has made no secret of this and has directly put up a sign on its official website that it provides such services.

In a previous report by The Block, an employee of DWF Labs took out a chart of the increase in token prices after previous cooperation to show the effect when competing for business. A source with direct knowledge of the matter said that during a conference call with potential customers, if the other party showed hesitation, a DWF Labs executive would start to mention the increase in token prices of previous cooperation projects. It is reported that Andrei Grachev, a managing partner of DWF Labs, will ask customers how high they want to increase the token price and discuss whether the company can achieve this goal.

Related reading:

《The Block reveals DWF’s starting model: using pull-up orders to attract customers》

《Exclusive interview with DWF Labs: We don’t manipulate anything》

Despite the controversy surrounding DWF Labs, the company and its core personnel have shown no signs of slowing down. Last September, HTX (formerly Huobi) awarded DWF Labs the Best Partner Award. Grachev recently posted on social media that the company is being audited by an unspecified Big Four accounting firm and is in the process of obtaining multiple licenses. According to an interview with BlockBeats, the company has applied for a virtual asset service provider license in the British Virgin Islands. Grachev himself is not shy about showing off his wealth or celebrating the company's success. Grachev posted a photo of a Lamborghini with the DWF Labs logo on it on social media, while his other posts show the company has been raising its profile by hosting events in Istanbul and Hong Kong.

And the "friendly competitors" did not hide their emotions towards DWF. Last year, a forum of Token 2049 unexpectedly caused a fight among cryptocurrency market makers. DWF Labs co-founder Andrei Grachev tweeted after the "Web3 Connect" forum to express his gratitude for the invitation. Unexpectedly, market maker GSR angrily said on Twitter that DWF Labs was not qualified to sit with the participants of this forum, market makers GSR, Wintermute, and OKX. For them, this was an insult.

GSR said, "It is very sad that at the end of 2023, bad actors like DWF Labs can still get so much attention." Another market maker, Wintermute CEO Evgeny Gaevoy also liked this post. What's more interesting is that in the event photos shared by market maker GSR, Andrei Grachev's part was forcibly removed.

Related reading: DWF was excluded by all peers, GSR bluntly said "not worthy of being on the same stage with other market makers"

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