Binance Faces Heat After Trader Reports Millions of Losses In Alleged Trading Scandal

Binance is under new pressure after a trader alleges he suffered over $5 million in losses due to extreme volatility in the AKEUSDT perpetual futures market on the exchange. The exchange has denied that the liquidations were due to a system failure or price error. It stated that its systems were functioning properly on the day of the incident.

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Binance User Alleges Massive Market Manipulation

The standoff is over trading taking place around 05:44 pm Beijing time on September 3.The stand-off is over trading around 05:44 pm Beijing time on September 3. Binance Customer Support stated that AKE had experienced significant price fluctuations on a number of crypto exchanges and on-chain markets. The team noted that it was a response to general market conditions rather than a problem with Binance.

Binance explained that it does not currently offer the trading of AKE on the spot market. It explained that the AKEUSDT futures contract is not based on Binance spot prices. Rather, the contract’s mark price is based on multiple external spot markets data. The exchange further noted this is a process aimed at mitigating the effect of an abnormal price from one of the venues.

The support team stated that during its own examination, it did not identify any issues with their pricing model nor their liquidation system. Binance said it did not experience any technical issues with the liquidations. Instead, the exchange blamed them on the inherent risks of leveraged trading in volatile markets.

The grievance was made by a trader who claims his over 30 funding-rate arbitrage trades were forced to liquidate in a few minutes. He said the loss was more than 5 million USDT. Moreover, he alleged that it was not a normal trading process, but a coordinated short squeeze by the AKE market.

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Dispute Over AKE Price & TUT Precedent

The trader stated that AKE was trading at around $0.0076 and went up to close at nearly $0.045 within hours leading up to the liquidations. He urged Binance to publish all trading and liquidation information and risk-control logs to clarify the incident.

However, CoinGape has not verified the losses of the trader. Also, the number of trades he has made has not been disclosed. Meanwhile, Binance has merely stated that a grievance has been filed.

As per public market data, the AKE price recorded massive volatility during the session on Thursday, September 3. When the spot charts were aggregated, however, it was shown that there was a peak which was lower than the highest contract price mentioned by the trader. The difference is not fully explained and could be due to price differences in futures markets, external crypto exchanges or to a consensus created from spot indexes.

The trader also cited the previous TUT liquidation incident, where the affected users were given compensation by the other competing exchanges. Binance, on the other hand, has declared that the AKE event was a result of market risk, not a trading mistake by the exchange.