DATs Highlighting Insider Trading Issues in Crypto and Traditional Finance: Insights from Shane Molidor

Crypto continues to grapple with a persistent insider trading problem, now spreading beyond token launches to encompass Digital Asset Treasuries (DATs). Investors are taking advantage of their early access to knowledge about forthcoming corporate cryptocurrency purchases.

Key Takeaways:

Insider trading issues are now appearing in Digital Asset Treasuries (DATs), where early knowledge of corporate purchases can be exploited.
Shane Molidor, CEO of Forgd, highlights that insider behavior is a systemic problem within crypto markets, often disconnecting prices from their true value.
The practices surrounding new token launches favor marketing over genuine price discovery, leading to volatility and poor experiences for retail traders.
The emerging dynamics in DATs, particularly involving less liquid assets, pose risks for market manipulation and price distortion.

Understanding the Insider Trading Problem in DATs

Shane Molidor, founder and CEO of blockchain advisory firm Forgd, explained that insider trading is more than a concern involving a few individuals. He emphasized that this behavior is a fundamental aspect of crypto markets, where price values frequently diverge from their true worth.

With extensive experience trading in both Western and Asian markets, Molidor noted that many earlier crypto institutions view regulation as an afterthought. In Western regions, it's prioritized to "ask for permission rather than forgiveness," whereas in Eastern markets, the approach is to act swiftly, maximize profits, and deal with repercussions later.

Molidor, who has previously held significant positions at exchanges like AscendEX and the Winklevoss twins' Gemini, as well as market maker FBG Capital in China, now runs Forgd. His company positions itself as a Web3 investment bank providing counsel on tokenomics, market maker partnerships, and exchange listings.

DATs Focus on Ether and Solana as Bitcoin Saturates. Source: Standard Chartered

As DATs become more popular, the same market behaviors that have led to insider trading in token trading are appearing in institutional products, Molidor cautioned.

“Even a small amount of buy-side interest can significantly impact the market when the assets are not liquid,” he explained. “It creates a beneficial cycle—until it doesn’t.”

The Launch Mechanics of Crypto Tokens

New token launches in cryptocurrency often prioritize showmanship over genuine market discovery. Molidor stated that those involved in the listing process—such as exchanges, market makers, and token issuers—are motivated by personal profit. This dynamic affects how new digital assets are presented to retail traders.

Exchanges might intentionally set low initial prices for tokens and maintain sparse liquidity at launch. Consequently, even minor buying activity from retail participants can drive prices up significantly. “They’re incentivized to manipulate prices to rise,” Molidor noted, adding that they can achieve this through tactics like deliberately underpricing tokens at the Time of Generating Efficiency (TGE) or by managing thin liquidity.

Related: Are TGEs the End of Blockchains?

Retail traders often misinterpret initial price spikes as indicators of strength, rushing to invest without realizing that their own trades are driving the surge. “They think they’re securing a fair price, but they’re really buying at all-time highs, leading to a negative user experience later,” he explained.

Price Analysis Shows Surge After Binance Listing. Source: Ren & Heinrich.

According to Molidor, this cycle primarily benefits exchanges. Each new listing generates volume, media attention, and user activity, even if prices quickly collapse afterward.

“It’s a marketing tactic,” he emphasized. “They tout, ‘The new asset we offered you early is now trading at a 10- or 20-fold increase,’ despite the absence of fair price discovery at the launch.”

Throughout Molidor's career, he has noticed a clear divergence in listing practices across regions. Western exchanges like Coinbase adopt a slower, more traditional auction-based approach designed for equitable pricing while delaying trading. In contrast, Asian exchanges prefer swifter launches to capture speculative interest.

“Coinbase’s method is more efficient,” Molidor remarked, “but it doesn’t cater to speculative retail tendencies.”

Crypto’s Market Dynamics in Digital Asset Treasuries

Similar trends are now manifesting in Digital Asset Treasuries (DATs)—which are companies acquiring cryptocurrencies for their balance sheets. Molidor noted this shift has moved from early insider trading in tokens to institutional products.

Initially, DATs focused on major cryptocurrencies like Bitcoin, but this makes them increasingly susceptible to manipulation.

The process of raising funds for treasury allocations also invites front-running. During the outreach phase to potential investors, insiders may gain early insight into which tokens will be purchased. This opens avenues for preemptive buying on the secondary market, anticipating price rises.

“Now, as we delve into lower-value, less liquid assets, front-running is becoming more conspicuous,” Molidor added.

However, this feedback loop can work adversely. If buying pressure diminishes, the same lack of liquidity that previously raised prices can lead to sharp declines. With minimal disclosure and a weak connection to fundamental values, price becomes the only measure of worth—one that can be easily manipulated.

Related: Bitcoin Ends ‘Uptober’ in the Red; BNB Activity Spikes: Charts from October.

“If price becomes our sole gauge of fair value, and it can be heavily impacted by minor buying or selling activity, runaway capitulation becomes possible,” Molidor warned.

Early instances where corporate cryptocurrency purchases affected markets were seen in 2020 and 2021 with Bitcoin purchases by Tesla and MicroStrategy. During that period, the market was thinner and more sentiment-driven, resulting in sharp price rallies following even modest announcements.

Today, Bitcoin benefits from considerably higher liquidity and broader institutional involvement, meaning such news barely sways the market. Molidor believes that the “virtuous loop” is now more visible in smaller, less liquid assets that still react dramatically to treasury or fund purchases.

Bitcoin's Price Response to Tesla's Purchase on February 8, 2021. Source: CoinGecko.

Continuing Insider Dynamics in the Crypto Space

The overlap between token markets and institutional products highlights the pervasive speculation and information asymmetry embedded in the crypto domain.

Molidor believes that moving forward requires improved alignment between blockchain founders, exchanges, and the institutions now entering the crypto landscape. He expressed concern that many token projects are characterized by “brilliant technology but poor market strategies,” while many institutional players lack understanding of how crypto's capital markets function.

“The dilemma arises from mutual misunderstandings,” he remarked. “Founders often don’t know how to navigate traditional financial systems, while institutions lack insight into how crypto markets truly operate.”

The influx of institutional investment may lend crypto greater legitimacy with traditional finance, but it can also introduce new risks due to a system that remains opaque.

The next chapter of the market will determine whether participants can adapt beyond this existing framework.

“You’re exposing investors to something that many don’t fully comprehend,” Molidor cautioned. “When prices revert to fair value, those misunderstandings become extremely pertinent.”

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