Insider Trading on SEC Lawsuit?
Today, the crypto market was hit hard.
The SEC announced a lawsuit against CZ and Binance, triggering panic across the board with over $1B in withdrawals and prices crashing.
Interestingly, some savvy traders may have known and acted on it beforehand.
Prior to today's news, articles were published suggesting that Richard Teng, a respected figure in financial market regulation, could be a potential successor to CZ.
This speculation came amid mounting regulatory pressures on Binance.
In the hours after this news and right before the announcement, a significant outflow of $500m was detected from Binance.
In total, there was a net flow of -$100M.
Around the same time, there was also a noticeable buildup of open interest on $BTC and $BNB short positions.
Interestingly, these positions were quickly closed following the SEC's announcement, aligning perfectly with the market downturn.
The announcement led to a crash in prices and immediately triggered a liquidation cascade.
In total, $300M in long positions were erased, marking it the largest liquidation event of the year.
Taken together, these events raise serious questions: Did some insiders have prior knowledge of the SEC's move?
While we don't have concrete evidence, the timing and nature of the unusual outflow, along with with the buildup in open interest leading to a temporary de-correlation between the crypto market and SPY, suggest the possibility of insider activity.
The clarity of this pattern implies it may be more than mere coincidence, hinting that informed decisions may have been made in anticipation of the SEC's action, an unfortunate phenomenon that frequently happens in crypto.