Hi, I am writing this on behalf of my friend (50+ years old, successful business owner) because he doesn’t use Reddit/Twitter or know where else to go with this horrific incident that happened to him . His ticket/issue number is: 1456972. His ticket is still “open”, but Binance has not responded back to him in over 24 hours.
My friend has been accumulating crypto in smaller transaction amounts over the past couple months. I am speculating that these amounts (he didn’t tell me) were in the low thousands of dollars. He has been doing these purchases through Paxos stablecoins.
The business that he has worked on and grown over the past 25+ years was recently acquired by another company. Because he is very optimistic about the future of DLT, he wanted to invest a much more significant amount of money into crypto across several projects from his recent company sale.
My friend purchased $500,000 worth of Paxos stablecoins on their exchange and transferred them to Binance, which arrived on Monday the 6th. Keep in mind, that my friend doesn’t know how order-books work, doesn’t know to look at 24 hour transaction volume for a particular pairing, doesn’t know the strategically optimal way to acquire a coin at the lowest possible acquisition cost, etc. Most people have never dealt with a live orderbook in their lives, and are mostly passive investors through 401Ks, Roth IRAs, index funds, and other investment vehicles that don’t have the added complexity of doing transactions directly on an exchange. I had spoken to him several months ago about looking into OTC brokerages for larger transactions, but it didn’t occur to him at the time. He also wasn’t aware that he would have been much, much better off trading the Paxos for Bitcoin on Binance, and then buying his other cryptos using Bitcoin, which have a much more stocked orderbook and higher transaction volume.
To make a long story short, due to my friend not knowing what he doesn’t know, he pressed “market buy” with $500,000 worth of Paxos stablecoins on the Paxos/Chainlink orderbook that normally only sees $10,000 worth of transactions in a 24 hour period. In the past, when he was doing his smaller orders of a few thousand dollars, he probably didn’t understand that the amount of sellers needed to fulfill the orders was much lower, in order to learn to pay close attention to how stocked an orderbook is. Needless to say, this was a very poor decision, and he cleaned out the entire orderbook with the price of that button and he spiked the price of Chainlink, which has a market price of about .58 all the way to $9,999. Yes, you read that correctly. He cleaned out the entire orderbook from 58 cents all the way up to $2.50. The next price jump after $2.50? $9,999. He bought 40 Chainlnk tokens, which at the time had a market price of 58 cents, at the price of $9,999 each. $400,000 for 40 tokens, which should have cost about $23.
Here are the screenshots:
My understanding from threads and discussions I have seen on Twitter and Reddit is that Binance does NOT allow you to place sell orders at higher than 1000%/10X of the current market price, which should have capped it at somewhere between $5.80 and $6.00. This transaction went through at OVER 17,000 TIMES the current market price. How did this happen? The discussions I have seen suggest that some bug on Binance allowed the seller to set such high market prices. What could be any alternate explanation? How could it be rationally justified to allow someone to sell tokens at over 17,000 times the current market price?
I understand that what my friend did was ill-advised. I understand that this is far from an optimal way to accumulate a token at the lowest acquisition cost possible. I understand that is is probably the worst way he could have gone about this process. With that said, there should be NO reputable exchange that allows someone to essentially be scammed out of $400,000 through any series of buttons clicked on their exchange. My friend should have simply gotten REALLY bad deals between 58 cents up to $5.80. He should NOT have been outright fleeced out of $400,000 for $23 worth of tokens.
He has an open ticket with Binance, but they haven’t responded in the last 24 hours. Our cryptocurrency space is trying to gain legitimacy and attract new investors into it. As long as the design of our systems can produce outcomes such as this one, we don’t deserve to have the space grow and mature. Stories and circumstances like this should not be allowed to happen to people.
I am kindly asking the community to ping CZ and Binance Support to please look into this and make things right for my friend. He is absolutely gut-punched and devastated from what has taken place. Thank you.