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🔍 Crypto’s Insider Trading Problem 🔍

It’s been a brutal week for crypto’s credibility – courtesy of three insider trading stories that surfaced recently.

Different players – team members of a Solana-based trading terminal, a Wall Street titan, and users of a regulated prediction market.

All three of whom remind us that the industry’s oldest problem is quite a way from being solved.

Let’s break them down.

1️⃣ The ZachXBT x Axiom Exposé

On-chain sleuth ZachXBT released an investigative report alleging that employees at Axiom, a Solana-based exchange, abused internal dashboards to spy on user wallets and trade on that data.

⚠️ The Allegation: Employees could look up users by wallet, referral code, or UID - exposing full wallet histories and linked addresses. That information was allegedly used to mirror trades and front-run activity.

🎙 Axiom’s Response: The firm said it was “shocked and disappointed,” removed access to the tools, and launched an internal investigation.

But the real irony?

A Polymarket contract betting on which company ZachXBT would expose saw heavy volume. Two wallets placed large bets on Axiom hours before publication and walked away with six-figure profits.

Insider trading… on a bet about insider trading.

2️⃣ Jane Street & The Terra Lawsuit

Terraform Labs’ bankruptcy administrator filed a lawsuit against Jane Street, alleging the firm used material non-public information during the May 2022 Terra collapse.

⚠️ The Allegation: When Terraform quietly withdrew $150M UST from Curve’s 3pool, a wallet linked to Jane Street removed $85M from the same pool within ~10 minutes; before the move became public. The lawsuit claims Jane Street front-ran the collapse, accelerating the UST depeg.

🎙 Jane Street’s Response: Jane Street denies the claims, calling the suit baseless.

If proven true, this would suggest that even elite TradFi firms are not immune to exploiting informational edges in crypto markets.

3️⃣ Kalshi’s Enforcement Actions

Prediction market platform Kalshi publicly disclosed its first public insider trading enforcement actions.

🕊️ A MrBeast editor was fined and suspended for betting on outcomes of videos he worked on.

🕊️ A California gubernatorial candidate was banned for betting on his own race.

Kalshi reported both to the CFTC and revealed it has opened 200+ insider trading investigations in the past year.

❓ What This Reveals

Crypto’s insider trading problem isn’t new.

From the Coinbase case (Ishan Wahi) to the OpenSea NFT scandal, employees exploiting listing info or platform knowledge has been a recurring theme.

What’s changed is scale.

Today:

🔴 Exchanges generate hundreds of millions in revenue

🔴 Prediction markets process tens of millions per contract

🔴 Institutional firms operate inside crypto infrastructure

The stakes are bigger. The informational advantages are sharper.

But compliance infrastructure hasn’t scaled at the same pace.

🧐 Is It a Big Deal?

Yes, but not because insider trading exists.

Every mature financial market deals with insider trading.

The difference is how seriously it’s policed. 👮

This week shows two things:

1️⃣ The problem is still systemic.

2️⃣ Enforcement is catching up.

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▶️ Bottom Line: It’s a big deal because crypto wants institutional legitimacy while still operating with startup-era controls. In other words, the industry has matured economically faster than it has operationally.

On the positive side, the fact that such incidents have come to light is a sign that the industry is attempting to crack down on the behaviour.

Such incidents force on-chain forensics, internal surveillance, and regulatory oversight to quickly strengthen and catch up. While it may be painful in the short-term, it’s massively bullish for the long-term health of the industry.
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