Despite the cryptocurrency industry being notoriously volatile, the recent collapse of RaveDAO (RAVE) has created an unprecedented level of market disruption. The token’s price experienced a collapse of more than 95% in a matter of hours causing a loss of $6.3 billion in market value. As such, the investigation into price manipulation involving major centralized exchanges and a prominent on-chain analyst has overshadowed the disastrous financial impact on investors.
The ZachXBT Allegations and the “Short Squeeze” Engineering
According to ZachXBT, a pseudonymous forum user who works as a blockchain investigator, the chain of events that led to the firestorm began with a series of exceedingly comprehensive claims made by him. These allegations prove that the demise of FTX and related companies was not a result of simply bad price action in today’s market, but rather, it was an “engineered” event. ZachXBT has revealed that insiders at major exchange firms adjusted their positions due to the short squeeze, leading them to offload their shares onto the market.
The operational details of the alleged fraudulent behavior suggest that those involved had access to private information related to liquidations. This allowed them to manipulate the price of RAVE at artificially high levels before removing market liquidity below those prices. ZachXBT is taking a bold step to accelerate the investigation process by offering rewards of up to $25,000 for individuals who can supply evidence of misconduct by participating in exchange.
CEX Giants Pivot to Damage Control
Following a completely new set of events uniting their communities, the leaders of Binance, Bitget, and Gate.io quickly responded to the outpouring of public sentiment. Binance CEO Richard Teng, who has devoted significant resources to ensuring regulatory compliance since taking over, has agreed to conduct a complete investigation into all market misconduct perpetrated by the RAVE pairs.
The CEO of Bitget Gracy Chen has also confirmed that a probe was started within one hour after allegations were made public. Gate.io’s Kevin Lee commented on this as well by saying “user protection comes first.” They have both emphasized their commitment to transparency in response to the situation. However, this scandal raises questions about the kinds of internal controls centralized exchanges (CEXs) have and whether they provide enough protection against employees’ front-running retail customers.
RaveDAO Denials and the Ghost of Governance
RaveDAO denies any involvement in price manipulation as investigation intensifies; however, the market remains sceptical; $6.3 billion wipeout is a continuing theme for Web3: the fragility of “Decentralized Autonomous Organisations” within highly concentrated liquidity financed by greedy insiders.
This event highlights the extreme risks that are associated with tokens that have low float and high valuations. Given the speed with which RAVE collapsed, it’s plausible that the “autonomous” side of the DAO was only a cover-up to mask what was more likely a highly centralized set of members.
Conclusion
The RAVE scandal has marked a turning point in the current bull run cycle in capital markets, regardless of whether blame for this scandal is placed on the DAO founders or rogue trading venue insiders. Regardless of who is to blame, billions of retail capital have disappeared due to the outcome of this scandal.
The crypto market will be keeping a close eye on audits of trading platforms like Binance and Bitget. Traders are trying to figure out if these platforms will compensate for their lack of accountability by making restitution payments or by making public relations statements. The RAVE chart is now a tombstone, commemorating the $6.3 billion loss for all traders in the market.
