$38M Token Sale Exposed: Movement Labs and Web3 Port's Deal Reveals the Dark Side of Crypto Market Making.

Market Makers or Exit Liquidity? — A deep dive into an incentive mechanism that allows market makers to sell tokens and share profits with the foundation.

Guests: Evgeny Gaevoy, Founder and CEO of Wintermute

Host:Haseeb Qureshi, Managing Partner of Dragonfly

Robert Leshner, CEO and Co-founder of Superstate

Tom Schmidt, Partner of Dragonfly

Summary of key points

• $38M Token Sale Exposed: Movement Labs and Web3 Port’s Deal Reveals the Dark Side of Crypto Market Making

• Market Makers or Exit Liquidity? — A deep dive into an incentive mechanism that allows market makers to sell tokens and share profits with the foundation.

• VCs Blind — Why top investors backed Movement Labs despite obvious risks, and what it means for crypto due diligence.

• Rushi fired — Movement Labs CEO removed from his post after weeks of denials, but was the rest of the team involved?

• Evgeny of Wintermute Speaks Out — As one of the largest market makers in crypto, Evgeny shares his thoughts on shady trading, sell-off mechanisms, and failures of transparency.

• Airdrops, market manipulation, and losses for ordinary investors — We dissect how token issuance is manipulated behind the scenes and who actually bears the brunt of the losses.

• Importance of disclosure —Haseeb believes that cryptocurrency markets need to be forced to disclose market-making protocols to prevent regulators from getting involved.

• Self-regulation or SEC intervention? — Can the industry correct itself, or are we setting off another wave of securities enforcement?

• The trust crisis in cryptocurrencies — Lack of transparency can lead to the collapse of the entire token model. This issue explores how to address this problem.

Summary of highlights

We hope that ordinary investors will not lose money as much as possible.

I think that for market makers, disclosing information is ultimately very beneficial. I think it will help normalize the market because it’s all about creating norms.

Many times people just want to find someone to blame, rather than having a deeper understanding of the market structure and how liquidity works.

For market makers, the incentive must be strong enough to drive the price up while also being able to cash out later.

Sometimes it’s hard to tell who’s reputable and who isn’t if you’re not deeply involved in the crypto community or lack referrals.

We have competitors in DeFi, centralized exchanges, venture capital, decentralized market making, etc., but there are probably only a few market makers that can cover all areas.

In my opinion, the ideal disclosure system is that the information gap between the exchange and ordinary investors is basically zero. When you apply for listing on an exchange, the information known to the public should be consistent with the information known to the exchange.

We can choose to disclose this information and be accountable to investors, or we can remain silent because we don't want to be criticized. This is exactly what is happening in our industry right now: no disclosure, but if you disclose, you’re attacked.

There are three channels through which disclosure can be effectively standardized. The first channel is through exchanges. The second channel is through venture capital firms. The third channel is through the market makers themselves.

It would be better for the industry if we took the initiative to create a disclosure system that works for us.

As an industry, we need to mature and address these issues in advance before we really lose the trust of ordinary investors. Such incidents will ultimately undermine confidence in the entire token industry.

Regulators may supplement, add to or formalize any consensus that the industry ultimately reaches.

I find most of the time I don’t believe that projects claiming “we didn’t know it worked this way”. In this case, they did.

Movement Labs Scandal: The Messy Inside Story of a Market Maker

Haseeb: There has been a lot of interesting news recently, one of which was reported by CoinDesk about Movement. A company associated with Movement Labs signed an agreement with a team called Web3 Port. The content of this agreement is that if the fully diluted valuation of Movement exceeds $5 billion, Web3 Port can liquidate the tokens they hold and share all profits from the sale of tokens with the foundation.

That is, this market maker acted as an “agent” in the token sell-off, and their incentive mechanism was to drive the token price up. This not only made the market maker money, but the Movement Foundation also profited from it, which obviously raised a lot of questions. They also received 5% of the total supply of tokens, which is a huge amount relative to the current total circulation, which is less than 10%.

They dumped $38 million worth of MOVE tokens, and as a result, Binance banned the account. At first everyone involved denied it, but eventually Coindex reported the story and provided the relevant contracts, which led to the firing of Rushi, the co-founder and CEO of Movement Labs. Now, it seems that the incident has finally come to an end. Movement is forming a new team and now