Author: flowie, ChainCatcher
Web3 giants have finally started to officially "purge corruption".
This morning, Binance reported that employees used their previous positions for insider trading and profited, with the involved parties currently suspended and potentially facing legal consequences. Binance being exposed for internal corruption is not new, but this is likely the first time the exchange has publicly disclosed insider trading details for "purging".
After Binance led the way in punishing employee insider trading, other exchanges like Huobi also indicated they would follow suit. However, compared to the normalized "anti-corruption" efforts of Web2 giants, the "purge" path for Web3 companies has just begun.
Publicly Disclosing Insider Trading Details, Crypto's "Purge" Officially Launched?
According to the Binance announcement, this purge originated from a report two days ago.
The involved employee was from the recently hot Binance Wallet team, who previously worked in business development at BNB Chain. Using information from their previous position, they purchased a project's tokens in advance and quickly sold them after the project's announcement, making substantial profits.
Binance's response was to suspend the employee and potentially pursue legal action. The four "whistleblowers" were also rewarded $100,000. Binance also provided an official reporting channel for the community.
However, the Binance employee's insider trading may have been publicly exposed by multiple Twitter users before the official report.
@pycharts and @BroLeonAus shared on-chain evidence, directly pointing to Binance Wallet BD and growth employee Freddie Ng's involvement in the $UUU "rat trading" behavior.
@BroLeonAus detailed the specific actions, stating that Freddie Ng likely knew in advance about $UUU's price manipulation, using a personal address to buy $UUU worth $312,000 with 10 BNB at a low price, then transferring everything to a money laundering wallet and selling at a high price through Bitget wallet, with the first transaction earning 181.4 $BNB, worth $110,000.
Additionally, Freddie Ng distributed the remaining $UUU to 8 different addresses, each ranging from tens of thousands of dollars. The community discovered this because the insider trading wallet was a 121-day-old KYC wallet named freddieng.bn.
Employees of exchanges like Binance being exposed for insider trading is not new. Each instance of community supervision and reporting has pushed Binance to intensify its anti-corruption efforts.
In February last year, RON's price drop after listing on Binance raised suspicions of insider trading. Although Binance claimed it was a misunderstanding, they also formally stated they would take corruption seriously.
Binance's specific anti-corruption measures mainly include: strengthening listing team management and firewall; canceling listings for project information leaks; and offering bounties to encourage public oversight.
Earlier this year, a Medium author named Qwertyuiopasdfghj published an open letter directly accusing Binance Labs (now renamed YZi Labs) of significant "internal corruption", suggesting that multiple Binance Labs executives colluded with invested projects for interest transfer.
Although Binance did not publicly investigate or disclose results for this report, after renaming Binance Labs to Yzi labs, they mentioned that Labs' employee information is public and welcome evidence, which can be directly reported to CZ and He Yi.
He Yi also mentioned in an early Space that Binance conducted over 120 internal audits in the past two years, dismissed over 60 non-compliant employees, and recovered over $30 million in illicit gains.
However, Binance had never previously disclosed corruption details. The recent insider trading information about the Binance Wallet team might signal Binance's anti-corruption efforts. Under diminishing wealth effects and compliance pressure, publicly addressing corruption might be one of the best ways for top exchanges like Binance to gain community trust.
Web2 Giants Have Been "Purging Corruption" for Over a Decade - What Can Be Learned?
Corruption has always been a difficult-to-eradicate corporate disease. Compared to Web3 companies, traditional Web2 giants have normalized anti-corruption actions after over a decade.
Since Alibaba established its group "Integrity Compliance Department" in 2012 and began internal anti-corruption efforts, other internet giants subsequently followed. These internet giants have some common anti-corruption methods:
In supervision, they establish dedicated anti-corruption investigation departments, create internal reporting mechanisms, and mostly publish regular anti-fraud notifications.
JD.com established an annual 10 million yuan anti-corruption reward fund to incentivize reporting of individual and unit violations. Recently, ByteDance publicly disclosed its 2024 company fraud report, detailing dismissed employees and those transferred to judicial authorities, analyzing violation types and key areas like procurement corruption, technical power monetization, job embezzlement, and information black market trading.
Internet companies also launch joint actions and blacklist systems. For example, the Sunshine Integrity Alliance initiated by Tencent, Baidu, Meituan, and JD.com has nearly 800 participating enterprises, uploading and sharing dishonest employee lists.
Additionally, internet companies use big data and AI technologies to monitor and analyze internal operations in real-time, promptly discovering and handling fraud. ByteDance established a dedicated database where investigators can retrieve data, and the system automatically identifies risks and pushes them to business heads.
Beyond supervision, internet companies conduct internal training to improve employee compliance awareness.
Compared to Web2, Web3 exchanges like Binance involve financial transactions, making it easier for internal employees to be motivated and capable of corruption. Web3 giants indeed need to lead the way in normalizing and systematizing "anti-corruption" efforts.
