Skip to content

Front Runners Making Millions on Binance and CoinBase

Less than an hour after GNS launched on Binance, one trader profited over $100,000 by selling their holdings in a fresh case of front running.

Photo by Jonathan Chng / Unsplash

Less than an hour after GNS launched on Binance, one trader profited over $100,000 by selling their holdings in a fresh case of front running.

The Gains (GNS) token was bought and sold on February 17 by a wallet (1) that had previously been involved in front-running token listings on Binance. This transaction occurred moments before the token was officially listed on Binance.

Lookonchain found that the crypto trader, whose identity was concealed, achieved a profit of more than $100,000 by buying a token in the seconds before it was listed on Binance.

On-chain investigators discovered that 30 minutes before Gains Network (GNS) coins were listed on Binance, a trader purchased GNS tokens for $208,335. After the IPO, the price of GNS jumped 51%, from $7.92 to $12.01, and the trader quickly realized a profit of $106,747 by selling their GNS shares.

In a mocking Twitter tweet, Lookonchain referred to the transaction as "smart money." Insider trading is permitted in many regions worldwide, including the United States, Canada, the European Union, and many more. Generally, trading on information that has yet to be made public is unethical, such as a stock's impending listing.

What is Front Running in Crypto?

Front running occurs on cryptocurrency exchanges when a trader or an exchange employee utilizes non-public knowledge about a customer's trade to make their trade before the customer's trade is executed, potentially to the trader's or employee's financial advantage.

The participant in front running gains an unfair edge in the marketplace. In addition to being a breach of trust, disclosure of insider information can also be illegal because it violates any duty of secrecy between the person who possesses the information and the other participants in the transaction.

Front-running, in which traders with insider information take large positions in cryptos that are almost certain to gain value, often due to being listed on a centralized crypto exchange like Binance, has been the focus of scrutiny on several prominent crypto exchanges over the past year.

Does it Happen at Coinbase too?

Former Coinbase product manager Ishan Wahi has pled guilty to insider trading, in which he made $1.1 million. Prosecutors at the federal level considered this the first example of insider trading involving cryptocurrency.

One study published in August 2022 indicated that 10% to 20% of all new CoinBase cryptocurrency listings were vulnerable to front running.

The CEO of Binance has addressed the issue of front-running, claiming that the practice is more common on the token side of the exchange.

Changpeng Zhao (CZ) spoke out against Wahi's conduct in July when charges were first made against the Coinbase employee, saying that "insider trading and front running should be criminal offenses.

Binance claims it has a self-regulatory policy that forbids staff from engaging in day trading. In the case of Coinbase's Wahi, for instance, the charges stem from his sharing confidential information regarding upcoming listings of tokens with his brother and a friend.

CZ stated in a recent AMA that many of the leaks and front runners do not originate within Binance but rather on the project/token side. You will be blocked if you try to get ahead of the game by spreading the word that you're getting listed on Binance.