Binance Cracks Down on Market Makers, a Long-overdue Trial

Original Article Title: "Binance Proactively Regulates Market Makers, A Belated Trial"

Original Article Author: Depth TechFlow

On March 25, Binance released a blog post with a very restrained title — "Cryptocurrency Market Maker Red Flag Guide."

However, industry insiders all understand that the true meaning of this blog post can be summed up in one sentence: I know what you are up to, and I reserve the right to clean up whenever necessary.

After experiencing a series of market maker scandals such as GPS, SHELL, and MOVE, Binance decided to explicitly incorporate into its rules the power it had always quietly wielded.

Bear Market New Species

To understand this announcement, we must first understand what the term "active market maker" means.

In a bull market, where every project has buyers, market makers have an easy job: placing orders, providing bidirectional liquidity, collecting fee rebates, and living a comfortable and respectable life. They are the true "liquidity providers" that the market needs but does not entirely depend on.

The bear market changed everything.

Buyers disappeared, no new money flowed into the on-chain, and the trading volume of the vast majority of altcoins was halved again and again in 2026. A medium-sized new project listed on Binance, without real users, may not be able to sustain daily trading volume, leading to a rapid price decline. For the project team, this is a slow death.

It was at this time that a group of people appeared, armed with a complete set of rhetoric:

"I will support your token, liquidity is on me, I will stabilize the price for you, all explicitly stated in the contract."

These are the active market makers, a popular species born out of the bear market.

Their business model is fundamentally different from traditional market makers: they do not make money from the buy-sell spread but directly participate in the token allocation of the project team, receiving a batch of zero-cost chips, and then unloading these chips through the legitimate cloak of "market-making."

How exactly does it work? The routine has been dissected clearly by insiders:

The project team's token has zero cost, and the real cost for the market maker is margin trading — putting in U as collateral for bidirectional liquidity. However, the brilliance of the active market maker lies in the fact that they often provide unidirectional liquidity: only providing tokens, not U. The buy-side liquidity is there, making the order book look healthy, but once retail investors start selling large amounts, there is no one to take the other side. That's when the price collapses.

The trading strategy of GPS, the market maker of Web3Port, has become a textbook example: within 21 hours of going live, they only sold and did not buy, dumping 70 million tokens, making a profit of about 5 million USD. GPS plummeted from $0.14 to $0.04, a 60% drop, with buying interest drying up during the period. Another token under the same team, SHELL, dropped from $2.3 to $0.3, with both crash curves nearly identical.

More ironically, Web3Port is not just a market maker; it is an entire ecosystem: the incubator is responsible for acquiring 1% to 3% of free tokens from early-stage projects, its market maker Whisper is responsible for liquidating the assets, and projects have to accept stringent conditions to get listed, with retail investors being the only buyers at the end of the chain. The entire process from obtaining tokens to cashing out is seamless.

The co-founder of Manta, victorji, made perhaps the most honest statement in the industry on X: "Almost every day, we receive invitations from so-called market makers and OTCs, who don't care about the fundamentals of the project at all." He also mentioned that Manta was once market made by Three Arrows during the Polkadot era, taking over 3% of the tokens, immediately sold them, and vowed never to sell.

Three Rugs and a Public Humiliation

When Binance made this announcement, some discussed the timing, suggesting it was in response to the pressure from last October's major crash. While not entirely incorrect, that misses the point.

The October crash was a loud wake-up call for Binance, but what truly made Binance restless was the succession of successful rug pulls by market makers on their platform from early 2025 till now—not just once, but repeatedly, each time causing significant disturbances that couldn't be contained.

Following the GPS incident, industry KOLs began to deep dive into the market-making landscape of Web3Port, discovering that the projects they served were not limited to GPS and SHELL—Aethir, dappOS, Movement, Puffer... a long list of names emerged, causing widespread concern in the market.

The MOVE incident was the final straw: the market maker dumped 66 million tokens, illegally profiting 38 million USD—an amount that cannot be explained by "normal market fluctuations," sparking immediate community doubt about Binance's regulatory capabilities.

Next up is SIREN, the drama that unfolded in the 48 hours just before the announcement.

SIREN was a token launched on the BNB Chain initially under the name "AI Agent Analyst," which had been almost forgotten by the market since its early 2025 launch. However, starting from February 2026, a mysterious cluster of wallets began accumulating on a large scale. By March 22, SIREN had surged from about $0.08 to a peak of $3.61, an increase of over 45 times. At one point, its market cap exceeded $2.2 billion, briefly entering the global top 30 by crypto market cap, surpassing OKB and UNI.

On-chain sleuths promptly took action.

Bubblemaps issued a warning on March 22: an address cluster consisting of over 200 wallets held around 50% of SIREN's circulating supply, valued at about $1.5 billion at the time, and stated, "There is only one outcome to this." Hours later, the collapse began.

On-chain analyst EmberCN further dug deep and found that the actual degree of control was far beyond expectations: among the top 54 largest holding addresses, 52 belonged to the same entity, collectively controlling 644 million SIREN, accounting for 88.5% of the total circulating supply, worth approximately $1.44 billion at the peak price. In the entire market, retail buyers were just gambling against a solo actor.

ZachXBT then linked these wallets to DWF Labs, pointing out on-chain connections between the relevant addresses and several obscure tokens (LADYS, RACA, TOMO) previously operated by DWF. DWF Labs co-founder Zac promptly denied involvement, but the on-chain evidence was overwhelming.

The manipulation tactics were more precise than GPS and MOVE. Market makers first pushed the price up to lure short sellers to enter for short positions, then quickly pumped the price to liquidate those short positions, triggering liquidations of $2.4 million on Binance and $4.7 million on Bybit, respectively.

Funding rate data showed that since March 14, SIREN had consistently exhibited a high negative funding rate, with short sellers paying long positions every hour, effectively paying on behalf of the tide pusher. In the early hours of March 23, the Gate spot market experienced a 78% flash pump in just 10 minutes, with a trading volume of only about $450,000, yet leverage liquidations hit hard.

On March 24, the collapse began. Within 72 hours, SIREN plummeted by 71% from its peak, with its market cap shrinking from $2.2 billion to $740 million. Some dubbed it the "biggest scam of 2026" in the X space.

This scene has an extra key detail compared to GPS: Binance adjusted the weight of each trading platform in the SIREN futures price index twice, attempting to reduce the impact of a single trading platform manipulation. This indicates that Binance itself knows that something is wrong with the market.

GPS was the beginning, MOVE was the upgrade, SIREN was a thorough public humiliation, and it happened on a futures contract listed on Binance itself.

Binance's approach has always been retroactive enforcement: freeze accounts, confiscate illicit gains, delist market makers when things go wrong. This approach can calm public opinion in a single event, but after three incidents culminating in SIREN, the issue has changed. The market started to ask: Are you unaware, or are you pretending to be unaware?

This is the real issue that the announcement on March 25 is meant to address. It's not about regulating market makers; it's about rebuilding their own credibility.

The Power Hidden in the Rules

Read this announcement carefully, and the six "Red Flag Behaviors" listed by Binance have already covered the full set of tactics used by active market makers: aggressive selling conflicting with token release schedules; one-sided order book depth; cross-platform coordinated selling; abnormally high trading volume inconsistent with price movement; and abnormal price swings due to insufficient liquidity.

Each one is a precise portrait of the GPS, SHELL, and MOVE incidents.

But more importantly, behind the rules is a casually mentioned statement: Binance will take swift and decisive action against any improper behavior, including blacklisting market makers.

At Binance, what blacklisting entails has already been demonstrated by Web3Port: frozen accounts, confiscation of illicit gains, and a prohibition on future market-making activities on Binance. For a market maker reliant on the Binance platform for survival, this is essentially an industry death sentence.

This is the most core part of this announcement, yet it is the least discussed: Binance is formalizing its previously quietly exercised discretion into rules through this announcement.

Previously, when Binance took action, it was "emergency response after investigating and finding issues"; now, when Binance takes action, it is "legitimate enforcement based on explicit rules." The nature is completely different. The former is reactive, the latter is proactive deterrence.

And the target of this deterrence is not just market makers.

The new rule requires token projects to disclose the identity, legal entity, and contract terms of their liquidity providers to Binance, prohibits profit-sharing agreements, and prohibits guaranteed return arrangements. This means that every project that wants to list on Binance must now place their arrangements with liquidity providers in view of Binance.

Who are your liquidity providers? How was the contract signed? Is there a profit-sharing agreement? Is there a guaranteed return?

The project's answers will determine whether you can list, whether you can continue to stay on Binance.

What the Rule Can Solve, What It Can't

Back to the real issue: Can this new rule cure the chaos of active liquidity providers?

The honest answer is: most likely not.

What Binance can manage is the behavior that occurs on the Binance platform. However, the operations of active liquidity providers are often coordinated across platforms—pumping on one platform, dumping on another, circulating on-chain funds through multiple dummy addresses—making it difficult for monitoring by a single exchange to form a global perspective.

The more fundamental problem is that the token distribution mechanism itself has not changed. As long as projects continue to use "free tokens for liquidity provision" and liquidity providers can still use zero-cost chips as ammunition for dumping, the incentive for active liquidity providers to harvest profits will not disappear. Change the name, change the shell, change the platform, and the game will continue.

There is a real loophole in Binance's new rule in terms of institutional design: Is the blacklist public? A non-public blacklist is a sword hanging over the liquidity providers, but only Binance knows which way the sword swings.

Crypto Brave (@cryptobraveHQ) said after Binance's announcement, "This move seems more like a disclaimer for the platform, as the platform has always been well aware of such events in the past, present, and future. Active liquidity provision is illegal in any jurisdiction, and reports should be synchronized with the relevant regulatory and law enforcement authorities, rather than just remaining at the level of internal review."

This statement hits a raw nerve.

Binance's internal blacklist falls far short in a legal context. Real accountability requires regulatory intervention, law enforcement agencies, not just exchanges acting as judges.

The industrial chain of active liquidity providers will continue to operate in a bear market, but the cost has increased, the risk of being caught has increased, and the pressure of being publicly named has increased. This is already the most that the industry can currently strive for.

What retail investors need to understand is: Understanding the logic of a market maker does not mean you can win this asymmetrical information war. But at least, you know who the referee is in this game, who the players are, and who the chips on the table are.

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