Introduction

The purpose of this report is twofold: first, to investigate whether there is any indication of Binance engaging in front-running activities related to token listings; and second, to compile a list of suspected addresses and their related activities.

Based on the timely accuracy of many of these trades, it seems likely that these entities may have had access to privileged information about the listings. This could potentially be due to the discovery of an API or exchange leak by traders or on-chain detectives. However, proving front-running activities can be challenging, and while trading records can be helpful, other evidence may also be necessary to build a strong case.

In our analysis, we examined historical transaction data in order to identify potential instances of front-running for the tokens listed in the table below.

Methodology

To address the difficulty of pinpointing a genuine Binance listing frontrunner solely based on their transactions, we employed data from three different time frames:

1. Accumulation of tokens within 1 week from Binance’s listing announcement.
2. Accumulation of tokens on the day of Binance’s listing announcement.
3. Accumulating tokens 2h before Binance’s listing announcement.

To ensure that we were only analyzing relevant data, we filtered transactions from all three time frames to include only those that sold all accumulated tokens on the same day as the Binance listing announcement. This was done in order to account for traders who were solely interested in participating in the Binance listing price rally and wanted to minimize their downside risk from the typical price dip that often follows. If an entity did not sell any or all of their tokens soon after the announcement, it could suggest that they were a long-term holder and not actively participating in the event being analyzed.

We used multiple accumulation time frames because it is likely that there are different types of frontrunners based on the quality of information they possess. For instance, some may only know that a token will be listed on Binance "soon" but not the exact date and time. Additionally, some frontrunners may also prefer to TWAP over several days leading up to the Binance listing announcement. Such scenarios necessitate using the first timeframe (1 week before the announcement) for analysis, while timeframes 2 and 3 apply to frontrunners with more detailed private information (such as specific date and time).

Additional filters:

1. Total inflow (USD) and Total outflow (USD) > $10k.
2. Addresses must sell most of the tokens that were accumulated in the week / day / 2 hrs, after the Binance listing announcement.

Although imperfect, we employed the aforementioned criteria to sift through tens of thousands of transactions since frontrunners are expected to trade in larger sizes due to the extremely valuable information they possess.

Possible Suspicious Activity

During our analysis, we were specifically looking for several behaviors and activities that are likely to be deemed suspicious. These included (but are not limited to):

1. Wallet only included a few transactions involving the listed token, with a trading time frame of a few days before or after the Binance announcement. Wallet was not actively trading or trading the token until the timeframe of the Binance announcement.
2. Layering of funds - Tokens are transferred through multiple accounts before eventually being sold or transferred to a CEX address.
3. Wallet is drained after the listed token has been sold. Especially if it is done soon after the Binance announcement time frame.
4. DEX contracts for listed tokens were approved long before the Binance announcement, but the tokens were only sold after the announcement was made. Typically, when a contract is approved, it is done so in preparation for immediate trading. There are few reasons to approve a contract several hours or days before executing a trade, which suggests that this activity may be indicative of front-running.
5. Wallet accumulates / TWAP into and out of tokens in small batches to avoid slippage and detection.
6. Fresh wallet created a few days before the Binance announcement and only trades that specific token.

Findings

We found wallets with trading activities that closely resemble that of front-running activities. We have chosen to separate the list of wallets based on whether they are still funded and active.

Wallets with significant positive balance

Since the wallets identified below have significant positive balances, it is likely that the entities behind them will continue to use them in the future. This presents potential opportunities for Nansen members to monitor their activities and potentially identify similar opportunities in the future.

Drained Wallets with insignificant balances

Disclaimer

Estimated profits we calculated are likely to be significantly lower than the true value, as we mostly used daily price snapshots. This method may not account for the intraday price volatility, which could affect the actual profits earned by the entities we analyzed. Wallets included in the aforementioned list are not exhaustive. Much of the filtering of wallets was done based on a range of different factors as mentioned above.

Key considerations:

1. Inconsistent privileged information: The exclusion of wallets that may have front-run one token listing but failed to front-run another listing may affect the accuracy of the study results. This is particularly likely when insiders do not receive consistent privileged information.
2. Difficulty in tracking transferred tokens: The study notes that some wallets accumulated tokens on DEXs but transferred them directly to other CEXs before the Binance listing announcement. This makes it challenging to determine whether the wallet was already selling the tokens before the announcement was made or shifting the tokens to their personal CEX wallet in preparation for dumping on the CEX once the announcement was out.
3. Difficulty in distinguishing between different types of trading activity: It may be difficult to differentiate between different types of trading activity, such as wash-trading or front-running, particularly in the case of tokens like Arbitrum, which also involves airdrops.