, the monolithic crypto exchange with branding across the US employs entire teams of traders to trade on its platform for profit.

The Financial Times broke the story, confirming the existence of’s trading and market-making teams by speaking with 5 people who have direct knowledge of them. This was not public knowledge until the story broke Monday.

One of these people went as far as to say that executives in the company lied about the existence of the teams to external trading houses. Furthermore, employees were allegedly asked to say that “there is no internal market maker type operation.”

It’s important to note that when asked for a comment by the Financial Times, said that this was false and that it hadn’t asked employees to lie.

The exchange also admitted that it was running an internal market maker, but stressed that it was treated exactly the same as the other market makers on the platform. It went on to say that “this is not a controversial practice.”

Is This Illegal and Will Be Punished?

While the basic action of market-making on your own platform is likely not illegal in and of itself, some of the tactics that some exchanges use to boost profitability certainly are. For example, the US Securities and Exchange Commission alleges that Binance engaged in manipulative trading tactics “that artificially inflated the platform’s trading volume.”

While the mere existence of these trading and market-making teams within is an interesting development, the alleged cover-up is much more shocking. Many centralized cryptocurrency exchanges utilize some kind of market-making or trading strategies.

That doesn’t mean it’s the norm elsewhere in the financial world, however. In a CNBC interview with the Chairman of the SEC, Gary Gensler, he spoke about these kinds of manipulative tactics: “In traditional finance, we don’t see the New York Stock Exchange also operating a hedge fund, making markets.”

Despite the ill-fitting metaphor, he is right that most traditional financial institutions don’t combine these strategies like offering trading to consumers while market making at the same time. However, much of traditional finance employs striking similar tactics to crypto exchanges. The most obvious is payment for order flow (PFOF).

Direct Market Making Vs Payment For Order Flow

Payment for order flow is when brokers are compensated by market makers for directing their clients’ trade orders to them, allowing the market makers to profit from the spread between buying and selling prices.

These brokers don’t do the market making itself like but they still profit off of someone else taking the other end of their users’ trades. This strategy is employed by many of the top brokerage platforms including Robinhood, E-Trade, Ally Invest, Webull, TradeStation, Charles Schwab Corporation, and TD Ameritrade.

Gensler seemed to be against PFOF, floating the idea of banning the controversial practice in a proposal. However, after massive pushback and threats of lawsuits from the biggest players like Ken Griffin’s Citadel, it’s now likely that the ban is dead in the water.

Secretive market making behind the scenes of a crypto exchange isn’t the same as payment for order flow but the general idea is similar. It would likely be much easier to manipulate markets in a crypto exchange from the inside for profit but there is no evidence whatsoever that is doing that.

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