Allegations of price management and wash trading against DWF Labs, 2023–2024

analysisFor a report published on 13 December 2023, the cryptocurrency news outlet said it spoke with 16 clients, prospective clients and people with knowledge of DWF Labs' operations and analysed ten proposals and contracts and related communications, and it reported that DWF Labs often talked about potential price movements when courting and serving clients. DWF Labs declined to comment or be interviewed, and Grachev declined to be interviewed for the article. Both of the cryptocurrency news outlet's December 2023 reports carry a disclaimer that Evgeny Gaevoy, founder and chief executive of Wintermute, a competitor of DWF Labs, sat on the cryptocurrency news outlet's board of directors from April to early November 2023 and remains a minority shareholder. ^{1 2}

analysisA pitch deck that DWF Labs prepared for prospective clients shortly after its launch in September 2022, which the cryptocurrency news outlet obtained and verified, had a section called "Price Management". It said the firm could synchronise its trading with a client's marketing team and that before or during scheduled news its algorithms "can be skewed to prefer one side of the orderbook and that is used to drive price upwards", adding: "Note that although DWF can provide artificial volume, it is hardly necessary due to the competitive pricing." A client gave the cryptocurrency news outlet messages from 2023 in which Grachev asked how high the client wanted its token's price to be raised and discussed whether the company could deliver this, and a prospective client provided messages from another DWF Labs executive offering to boost its token's price; the Telegram accounts were confirmed as authentic through DWF Labs' own verification checker. Neither the deck nor the messages is retained here. The cryptocurrency news outlet reported that such language had more recently been phased out of written pitch materials, and stated that there was no suggestion that any of the projects named in its article had discussed price management with DWF Labs. DWF Labs declined to comment and Grachev declined to be interviewed; in a post cited in the same report, Grachev acknowledged that he had made mistakes and that the company was "not ideal", but said it was raising the bar among market makers by taking risks and was "controversial and proud of it". When a newspaper raised such documents in May 2024, a Binance spokesperson said the exchange was unaware of them and that "if true, it would be very concerning to us and other participants". No regulator or court finding about these practices is recorded in the retained material. ^{1 3}

analysisAccording to the terms of three deals seen by the cryptocurrency news outlet, DWF Labs' "liquid token investments" typically consisted of buying a project's tokens with stablecoins at a 5-15% discount to the market price, in daily tranches of about $100,000-150,000 over one or several months; the cryptocurrency news outlet concluded that project founders could thereby effectively cash out through DWF Labs while announcing a large investment. In two market-making proposals it saw, DWF Labs' call options on borrowed tokens had strike prices set at many multiples of the token price; one client said DWF Labs gave scant details of the market-making services provided, and another that it received no report at all. These accounts are based on deal terms and clients' statements reported by the cryptocurrency news outlet; the contracts are not retained. In an earlier interview with the cryptocurrency news outlet, in April 2023, Grachev had said: "We transfer coins to exchanges but we never dump it", adding that most tokens bought the previous month had not been sold. Counterparties named by the cryptocurrency news outlet described their deals favourably in written statements to it. The Algorand Foundation said its $50 million transaction was an over-the-counter purchase of ALGO tokens in tranches completed in July 2023, and that "at no stage" during the negotiations was there a suggestion of DWF "moving the market or providing artificial volume". The EOS Network Foundation's deal comprised a $45 million purchase of EOS tokens and a $15 million commitment to invest in its ecosystem, a partnership its chief executive called "exceptionally productive", and a core team member of the memecoin project Floki, which sold $5 million of tokens to DWF Labs, said the project was very happy with the partnership. ¹

analysisA cryptocurrency news outlet wrote in September 2023 that parts of the crypto community suspected DWF Labs of pump-and-dump trading in tokens such as YGG, DODO and C98, noting that wallet addresses attributed to DWF by on-chain analytics firms were active, while acknowledging that there was no direct evidence; in the same interview Grachev said: "We don't engage in any manipulation." Rival market makers were openly critical in 2023. After Grachev appeared on a panel with other market makers, GSR chairman Cristian Gil wrote on X that Grachev "had absolutely no business to be on that panel" and that "bad actors like @DWFLabs" still got airtime, and a cryptocurrency news outlet reported that Wintermute's chief executive Evgeny Gaevoy liked the post. That is public criticism by competitors, not a finding, and GSR did not respond to the magazine's requests for comment on the post. ^{1 2 3}

analysisAfter the criticism of 2023, according to the cryptocurrency news outlet citing a digital-finance news outlet and a cryptocurrency news outlet, DWF Labs told clients to call such deals "strategic partnerships" rather than "investments" and to announce staggered purchases only once they were completed, and Grachev told a cryptocurrency news outlet: "We won't announce anything that hasn't been completed yet." A cryptocurrency news outlet likewise reported in May 2024 that DWF Labs had replaced "investment" with "strategic partnership" in its announcements. These are press accounts drawing on other outlets; the client instructions are not retained. ^{4 5 6}

analysisOn 9 May 2024 a newspaper reported, as relayed by a cryptocurrency news outlet and the cryptocurrency news outlet, that Binance's market-surveillance investigators had submitted a report alleging that DWF Labs manipulated the prices of several tokens through $300 million of wash trades in 2023, and that Binance deemed the evidence of market abuse insufficient and dismissed the head of the investigating team a week later. Chinese press retelling the report said that after Grachev promoted the YGG token ahead of a Binance derivatives launch in August 2023, DWF Labs sold about five million YGG tokens near the price peak, and that in late September 2023 the surveillance team recommended removing DWF Labs from the platform. Binance told the newspaper that it rejected claims it had permitted market manipulation and that the employee was dismissed after an inquiry found the allegations against the client were not "fully substantiated", and said that it does not tolerate market abuse; according to the newspaper, Binance had also rejected the request to remove DWF Labs. DWF Labs said the article contained "many allegations that we believe to be unfounded and that do not accurately represent our ethical business practices" and said on X that they were "unfounded and distort the facts"; its co-founder Heng Yu Lee called them FUD driven by competitors. The investigators' report is described by the press and is not retained, Binance did not act on it, and the retained records show no regulatory or court finding against DWF Labs on these allegations. ^{1 2 3 4}

analysisChinese press reported on 10 May 2024 that Binance co-founder Yi He, responding to the report, said that Binance's market-maker surveillance was strict but not aimed at any fund, that competition between market makers involved "dark" methods, and that Binance reported to its monitor and other regulators. The account is retold by a Chinese outlet; Yi He's original post is not retained. ³