Recently, Binance has had its fill of drama, first with the RED project team changing the airdrop rules before the launch, and after Binance suspended trading, it quickly resumed.
Then there was the GPS market maker selling a large amount of tokens right after the token's spot trading went live, leading to a drastic price drop, followed by a series of stories after Binance announced an investigation.
Event background
Both GoPlus Security (GPS) and MyShell (SHELL) cryptocurrency projects have entrusted the same market maker to manage the liquidity of their tokens on the Binance platform. The primary responsibility of the market maker is to maintain market liquidity to ensure smooth trading. However, the operations of this market maker have sparked much controversy.
Event process
Price abnormal fluctuations: After the GPS token was launched on Binance, its price fluctuated significantly in a short period. It first skyrocketed from $0.1304 to $0.2015, but then plummeted to $0.0642, causing huge losses for investors.
Market maker's illegal operations: After investigation, it was found that the market maker only conducted sell operations within 21 hours, with no buying activities, selling off 70 million GPS tokens and profiting around $5 million. This one-sided selling behavior seriously disrupted the market order, leading to further price declines.
Association with MyShell project: During Binance's investigation into the GPS market maker, it was unexpectedly discovered that this market maker was also responsible for the market making of the MyShell (SHELL) project. Although the specific violations of this market maker in the MyShell project have not been clarified, given its misconduct in the GPS project, Binance has also begun reviewing its activities in the MyShell project.
Binance's handling measures
Delisting the market maker: To maintain normal market order and protect investors' interests, Binance decided to delist the involved market maker from the platform and prohibit them from continuing any market-making activities on Binance.
Seizing and compensating profits: Binance has confiscated the profits gained by the market maker due to illegal operations and plans to use these profits to compensate the affected users of the GPS and SHELL projects. However, the specific compensation plan will be formulated and announced by the project team.
Project team's response
GoPlus team: GoPlus founder Mike issued a public statement after the incident, expressing apologies to the community. He admitted that due to the team's lack of experience in market manipulation, there were issues in entrusting the market maker to manage liquidity. Mike promised to push for the market maker to repurchase all sold GPS tokens and stated that the team has never sold any GPS tokens since the project's launch, and all tokens held by the team can be tracked on-chain.
MyShell team: As of now, the MyShell team has not released a detailed public statement regarding the incident. However, it can be speculated that they are working with Binance to jointly formulate a compensation plan for SHELL project users.
Latest developments
Compensation plan to be announced: Currently, the GPS and SHELL project teams are actively formulating a specific compensation plan, which will clarify how to use the confiscated profits from Binance to compensate the affected users. Once the plan is determined, it will be promptly announced to the community.