Frontrunning is the practice of using confidential information to buy or sell a particular asset at a knowingly high profit. In traditional finance, the practice of frontrunning is generally considered unethical and illegal, and so are cryptocurrencies.

So-called frontrunning can be done if one has knowledge of certain transactions or events that will almost certainly affect the value of the asset. For example, if a large company is going to buy something in large volume, the transaction is likely to increase the value of the asset.

The same can be true for situations that do not involve transactions. For example, if the global giant introduces payment support for a particular cryptocurrency, the value of the latter is likely to rise after the news is published. And if a certain person uses such knowledge for their own benefit – that is, buying the asset and then selling it – this is also considered illegal.

How to make a quick buck on crypto?

A trader bought $208,335 worth of tokens called Gains Network (GNS) just 30 minutes before GNS was listed as an available trading instrument on Binance. Immediately after listing, the GNS token rose 51 percent, increasing in value from $7.92 to $12.01. Anonymous then closed the position, earning a $106,747 profit in less than an hour, according to Decrypt.

As a reminder, listing on major cryptocurrency exchanges is a positive development for any crypto project - and especially a relatively new and small one. In such cases, the event means not only an increase in trading volumes for the underlying asset, but also recognition of its prospects. All the same, trading platforms are obliged to study the project, its developers and plans. Accordingly, the appearance of the same GNS on Binance means that the representatives of the latter have spent a lot of time to get acquainted with the project, after which they made a positive decision regarding its listing. This is the reason why the exchange rate went up.

Of course, one can assume that the anonymous trader is just lucky, but the prospect of such a timing is hardly believable. Still, it wasn’t too long ago that some crypto-exchanges faced criticism over suspicions – in some cases confirmed – related to frontrunning.

In particular, last month, former Coinbase manager Ishaan Vahi pleaded guilty to engaging in insider trading. His scheme generated a profit of $1.1 million. Prosecutors also called it the first case in US jurisprudence with confirmed use of confidential information to trade cryptocurrencies.

When the charges were originally brought against Waha in July last year, Binance CEO Changpen Zhao issued a condemnation of such actions. Here is Zhao’s relevant rejoinder.

It would be right for any country to make it a crime to use confidential information for trading and frontrunning, whether it is regulated or not.

Alas, Binance ended up not being immune to such practices. As it became known at the end of January 2023, anonymous traders were also buying large volumes of cryptocurrency in the summer of 2021 before listing them directly on that trading platform. In this regard, experts have suggested that there was a leak either from the company’s employees or via an API. We wrote more about the incident in this piece.


It can be assumed that the incident was the result of a leak. Obviously, the exchange is not the initiator of what's happening, because it earns much more on commissions, and the prospect of getting tens or hundreds of thousands of dollars is definitely not worth the reputation of the most popular cryptocurrency exchanger in the world. So it's clearly up to the company's staff to do some work here and shut down the source of the data, because this could also lead to problems for the platform itself.