Crypto Scandals: Binance Suspends Employee Over Insider Trading – Prosecutors Seek 12-Year Sentence for Do Kwon

Binance Responds to Insider Trading Allegations

The world's leading cryptocurrency exchange Binance has suspended an employee suspected of misusing inside information for personal gain^[1]. The affected employee is alleged to have purchased a newly listed token before its official launch to profit from rising prices.

The token in question is the memecoin "Year of the Yellow Fruit," which launched on the BNB Chain^[1]. According to allegations, the employee distributed text and images of the token via various official Binance X accounts less than a minute after launch. Screenshots show that official Binance channels encouraged traders to "plant wisely" and "harvest abundantly" – an allusion to the "yellow fruit," presumably a banana^[1].

Whistleblowers to Be Rewarded

Following an internal investigation, Binance confirmed the incident. "We tolerate no misconduct whatsoever. We will continue to strengthen our internal controls, refine our policies, and ensure that incidents like this do not recur," a spokesperson for the cryptocurrency exchange told TheBlock^[1].

Binance also announced it would distribute a reward of $100,000 equally among five verified whistleblowers who submitted reports through the official whistleblowing channel^[1].

Classic Pump-and-Dump Scheme

The memecoin launched at approximately 5:30 UTC and initially reached a high of $0.0038^[1]. Following Binance's official confirmation of the incident, the price even climbed to as high as $0.0061 before correcting by more than 50 percent – a classic pump-and-dump scheme^[1].

Twelve-Year Sentence Sought for Do Kwon

In another significant case, U.S. prosecutors are now seeking a twelve-year prison sentence for Do Kwon, founder of the collapsed Terra ecosystem^[2]. Court documents reveal that prosecutors based their demand on the severity of the crime and its devastating consequences for investors.

"Kwon's misconduct, the consequences of his crime, and his response to the disclosure of his actions demonstrate that he poses a substantial danger to the community and deserves a substantial sentence," the documents state^[2].

Do Kwon pleaded guilty to fraud in two cases in August and waived the right to a trial on these charges^[2]. His legal team, however, is seeking only five years in prison and argues that his prison time served in Montenegro should be credited toward the sentence^[2].

Consequences of the Terra Collapse

The collapse of the Terra ecosystem in May 2022 is considered one of the most devastating in cryptocurrency history. According to reports, over $40 billion was destroyed^[2]. Do Kwon, through his company Terraform Labs, issued the algorithmic stablecoin UST, whose collapse brought the entire network to its knees^[2].

The charges against Kwon include multiple counts, including fraud and violations of securities laws^[2]. The sentence is expected on December 11^[2].

Both cases underscore the growing importance of compliance and controls in the cryptocurrency industry as well as regulators' increasing willingness to take tough action against misconduct.