Market Maker who operated at the exchange acted in bad faith, clients who invested in two altcoins will receive part of the blocked amount back.
Binance, the largest cryptocurrency exchange by trading volume, announced a compensation program for investor clients of two altcoins after an internal fraud by a market maker was revealed.
Market makers are the actors responsible for providing volume and liquidity for investors' trades on platforms. In the cryptocurrency market, it is common for them to profit from this practice, which is not illegal.
Thus, the main benefit of market maker operations is the reduction of volatility in the price of cryptocurrencies and bitcoin, keeping buy and sell orders active in the book.
Binance bans market maker who committed fraud and will refund amounts to clients.
Many market makers operate on multiple exchanges simultaneously, practicing arbitrage to profit from price differences between markets.
They are also essential for executing large volume orders, allowing institutional investors or whales to move significant amounts without causing excessive impact on prices.
To encourage this type of activity, exchanges like Binance offer market making programs, providing benefits such as reduced fees and financial incentives to ensure liquidity in certain trading pairs.
But if the actors cause damage to the company or do not comply with the rules, their accounts can be banned. According to Binance's announcement last Sunday (9), a market maker had their account banned and their funds confiscated by the exchange.
Clients who traded two altcoins, $GPS and $SHELL will soon receive some rewards, due to concerns about market manipulation.
"Based on the findings of the investigation into one of the market makers (the 'Market Maker') for GoPlus Security (GPS), we identified the MyShell (SHELL) project using the same Market Maker.
Due to the misconduct of the Market Maker, with the aim of better protecting Binance users, we have taken the following additional measures: 1- Disabled and prohibited any other market-making activity by the Market Maker on Binance; 2- Confiscated revenues from the Market Maker in order to compensate users for GPS and SHELL (The detailed compensation plan will be determined and communicated by the respective projects at a later date).
Binance doubles down on attention to market maker activity operating on its platform.
In a statement, Binance requested that authorized market makers working on Binance comply with the exchange's requirements to operate according to the rules.
Thus, the exchange announced that it will remain alert, and new cases of account bans for these actors are not ruled out.
"Binance will take additional measures against any market makers authorized by the project who do not comply or violate such principles and rules to better protect our users."
The exchange concluded by thanking everyone and the community for their support. The name of the market maker and further details of their irresponsible actions were not disclosed by the exchange.
