The history of crypto exchanges trading against their own customers
By now, it’s common knowledge that Sam Bankman-Fried (SBF) was secretly routing FTX customer funds to his trading firm, Alameda Research, and used it to trade against those same customers on FTX. Oh, the irony. Unfortunately, FTX isn’t the only crypto exchange that trades against its own customers — and the practice has a long history. In the 1990s and 2000s, binary options exchanges and forex exchanges regularly operated ‘B Book‘ exchanges — where forex brokers take the opposite of a customer’s bet and accept the market risk. As opposed to ‘A book’ forex brokers who actually fill customer orders on an independent exchange, B book brokers simply notate customer orders and settle trades internally. Digital asset exchanges likely trade against their customers more often than they want to admit. Its prevalence is likely as pervasive as B book binary options and forex exchanges. In fact, the name of major crypto exchange Binance, currently embroiled in a mountain...