Binance Bans Market Maker Over ‘Misconduct’ With GPS, SHELL Tokens

Global crypto exchange Binance has permanently banned a market maker involved in “misconduct” with GoPlus Security (GPS) and MyShell (SHELL) tokens, following an investigation into its actions.

The exchange’s response involved offboarding the market maker and confiscating the proceeds from its noncompliant activities, according to a statement released Sunday.

Binance plans to use these funds to compensate affected GPS and SHELL holders. The details of the compensation plan will be revealed in the coming days.

The market maker’s actions resulted in a $5 million loss due to its failure to maintain balanced buy and sell orders and ensure sufficient liquidity, as per Binance’s market-making rules.

A market maker is an entity or individual that facilitates liquidity in a market by continuously placing buy and sell orders for better trading experience and minimize price volatility.

300 million GPS tokens, located outside Binance, were being used for market-making activities, according to anonymous on-chain analyst “Ai 姨.”

The market maker reportedly sold 70 million of these tokens within 21 hours of the GPS listing, making a profit of $5 million by only selling without any corresponding buying orders.

Binance also discovered the market maker violated policies related to high-frequency order placements and cancellations, which disrupt market stability.

While Binance works on a compensation plan for affected users, the market reaction has been mixed. GPS plunged by over 11%, while SHELL’s token price saw an uptick of 6.5% after an initial decline to $0.26, CoinGecko data shows.

Binance's new listing mechanism

In a related development, Binance revealed last week it is introducing new listing and delisting mechanisms, allowing users to participate in decisions about which tokens should be listed or removed from the exchange.

The exchange will now enable users holding at least 0.01 BNB to vote on tokens up for listing or delisting, giving them more influence in the process.

Binance will still retain final authority over which tokens are included in the voting pool.