Binance co-founder Changpeng “CZ” Zhao proposed creating a dark pool perpetual swap decentralized exchange (DEX) to prevent market manipulation.

In a June 1 X post, Zhao said that he has “always been puzzled with the fact that everyone can see your orders in real-time on a DEX.”

“The problem is worse on a perp DEX where there are liquidations,” he said.

Zhao added, “If you’re looking to purchase $1 billion worth of a coin, you generally wouldn’t want others to notice your order until it’s completed.” This is to prevent front-running and maximum extractable value (MEV) bot attacks, which can result in increased slippage, worse prices and higher costs.

His comments follow the liquidation of nearly $100 million in Bitcoin long positions on Hyperliquid reportedly held by a trader known as James Wynn. The event, which occurred after Bitcoin fell below $105,000, sparked claims on X that some users had coordinated to “hunt” Wynn’s liquidation.

One X user claimed that Tron co-founder Justin Sun showed interest in participating, but the claim remains unconfirmed. He also went so far as to invite Eric Trump, the son of the United States’ President Donald Trump, to the group.

Related: Financial freedom means stopping crypto MEV attacks — Shutter Network contributor

What are dark pools?

Zhao said that “large traders in TradFi use dark pools, often 10 times bigger” than traditional, transparent pools. Dark pools are private trading venues where large orders are hidden from public view until after they are executed.

This prevents front-running, slippage and MEV attacks by concealing order size, price and intent. Still, implementing decentralized dark pools would require complex systems such as zero-knowledge proofs (ZK-proofs) or delayed settlement mechanisms.

Maria Carola, CEO of instant exchange StealthEX, told Cointelegraph that “the fundamental challenge in building a dark pool-style perp DEX is achieving both privacy and verifiability.” She noted that ZK-proofs and encrypted order matching are promising avenues for development. She added:

“I think one concrete approach is leveraging zk-SNARKs or zk-STARKs to validate trade execution and settlement without revealing trade details.“

The obstacles are not just technical in nature. Carola highlighted that “launching an onchain dark pool, especially for perpetuals, enters a complex regulatory landscape.”

Related: Protecting Web3 users’ integrity by preventing malicious MEV — Here’s how

Trade privacy is critical to derivatives

Zhao argued that privacy is particularly important in derivatives markets. He said public visibility of liquidation levels exposes large traders to coordinated attacks that could force premature liquidation:

“If others can see your liquidation point, they could try to push the market to liquidate you. Even if you got a billion dollars, others can gang up on you.“

The Binance co-founder admitted that there are counter-arguments to such designs, with the added transparency potentially allowing market makers to absorb large orders. He said that this is “possibly true.”

“I won’t get into an argument on which is right or wrong. Different traders may prefer different types of markets,“ he said.

StealthEX’s Carola added that “opacity is a double-edged sword,” noting that it reduces front-running, but “also obscures manipulation attempts, especially in a leveraged environment.” “To address this, a ‘dark’ perp DEX must implement adaptive risk engines and behavioral anomaly detection, ideally with cryptographic accountability baked in,“ she said.

Zhao concluded by encouraging developers to launch an onchain dark pool decentralized exchange with perpetual swaps. He said this could be achieved “either by not showing the orderbook, or even better, not showing deposits into smart contracts at all, or until much later.”

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]]> https://earlybirdsinvest.com/binance-co-founder-cz-proposes-dark-pool-dexs-to-tackle-manipulation/feed/ 0 39699 https://earlybirdsinvest.com/gotbit-founder-extradited-to-us-to-face-market-manipulation-and-fraud-charges/ https://earlybirdsinvest.com/gotbit-founder-extradited-to-us-to-face-market-manipulation-and-fraud-charges/#respond Wed, 26 Feb 2025 20:59:42 +0000 https://earlybirdsinvest.com/gotbit-founder-extradited-to-us-to-face-market-manipulation-and-fraud-charges/

Gotbit founder Aleksei Andriunin has been extradited to the US to face charges related to market manipulation and wire fraud conspiracy, according to a Feb. 26 statement by the US Attorney’s Office District of Massachusetts.

Andriunin was arrested on Oct. 8, 2024, by authorities in Portugal, where he was living. Following his extradition, he appeared in federal court in Boston on Feb. 25 and was ordered to be detained pending a future hearing. 

On Oct. 31, 2024, a federal grand jury in Boston indicted Andriunin and Gotbit directors Fedor Kedrov and Qawi Jalili on charges of wire fraud and conspiracy to commit market manipulation and wire fraud.

Market manipulation

According to court documents, Gotbit allegedly operated as a “market maker” in the crypto industry, providing market manipulation services between 2018 and 2024. 

Andriunin allegedly created software to facilitate “wash trading,” a practice that artificially inflates trading volumes. This tactic helped projects secure listings on data aggregators such as CoinMarketCap and gain entry to larger exchanges.

Investigators allege that Gotbit employees, including Jalili and Kedrov, marketed these tactics to clients and used multiple accounts to disguise the wash trading from blockchain observers. 

The scheme reportedly involved transactions worth millions of dollars, with Gotbit generating tens of millions in revenue from fraudulent activities. The authorities accuse Andriunin of transferring a portion of these proceeds into his personal Binance account.

If convicted, Andriunin faces up to 20 years in prison for wire fraud and up to five years for conspiracy to commit market manipulation and wire fraud. He could also be subject to fines of up to $250,000 or twice the gross gain or loss from the offenses, restitution, and forfeiture.

Artificial trading volume

The US Securities and Exchange Commission (SEC) also filed fraud charges against Gotbit and its employee, Fedor Kedrov, on Oct. 15, 2024.

The SEC alleged that the platform used a scheme to manipulate the market for “Robo Inu,” a crypto asset marketed as a security to retail investors.

According to the SEC complaint, crypto asset promoter Vy Pham hired Gotbit to generate artificial trading volume for Robo Inu. Gotbit allegedly employed wash trading techniques to generate fake market activity on trading platforms. 

Investigators claim the firm used automated trading algorithms to fabricate over $1 million daily artificial trading volume.

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