PancakeSwap claims its trading competition winners were selected randomly, but blockchain records suggest over half of them belong to a cluster of linked wallets.
Investigation
PancakeSwap’s trading competition was supposed to reward random winners, but blockchain records show that about half of the 1,700 winning wallets are part of connected clusters.
The competition was the second of its kind and structured for investors to earn points by trading the tokens of five sponsors from the Binance Alpha program: League of Traders (LOT), Bedrock DAO (BR), MilkyWay (MILK), NodeOps (NODE) and Moonveil (MORE).
To accumulate points, the trades had to be conducted on PancakeSwap, the top decentralized exchange (DEX) by total value locked on the Binance-founded BNB Chain.
In its campaign , PancakeSwap stated that winners who reached a three-tier trading volume threshold would enter a “random lucky draw.”
Despite the lottery-style reward format, Cointelegraph has learned that at least 850 wallets that were selected as winners were funded by other winning wallets. These wallets transferred each other BNB (), the native cryptocurrency of the BNB Chain, which was used to wash trade sponsor tokens to reach the threshold. The BNB was then passed to the next wallet to repeat the process.
“The wallets were directly connected to each other, and they were getting picked. The chance of that happening consecutively is close to zero,” a League of Traders representative told Cointelegraph.
“The [prizes] were not distributed fairly to the participants,” the representative said, adding that the winners appear to have been “hand-picked” rather than randomly drawn.
PancakeSwap did not respond to Cointelegraph’s request to comment on this story. Cointelegraph also reached out to the four other sponsors and did not receive a response before publication.
PancakeSwap’s $250,000 trading lottery
PancakeSwap has remained central to the BNB ecosystem since gaining traction in 2021, when high Ethereum gas fees pushed traders to cheaper alternatives.
League of Traders told Cointelegraph that PancakeSwap recruited Binance Alpha projects to sponsor its second trading contest, with each putting up $50,000 to fund the prize pool. Binance Alpha is a platform that gives investors early access to pre-listed tokens.
Related:
League of Traders and four other Binance Alpha projects raised the reward pool’s value to $250,000.
To take part in the trading competition, investors simply had to accumulate trading volume for the sponsor token on PancakeSwap. The pool was split into three tiers: $2,000, $5,000 and $10,000.
A participant could take part in the random draw for all five tokens but could not be selected for the same token more than once. That would bring the maximum possible reward for one wallet to $2,500.
Initially, the trading competition was scheduled to run from July 7 to July 27, but it was to Aug. 5.
Blockchain trails tie PancakeSwap’s random winners
PancakeSwap’s blog post states that the winners would be selected at random, but blockchain records suggest otherwise.
Take wallet , for example, a tier three winner that received 21,730 LOT tokens from the competition’s wallet on Aug. 7. This wallet’s activity log shows that it traded LOT with WBNB back and forth on PancakeSwap on July 24. Once the trading threshold was met, it converted the tokens back to BNB, which was then passed off to another eventual winner.
This LOT winner was able to finance these wash trades with $2,130, or 2.7 BNB at the time. Less than a minute before the circular trades started, it received the BNB from another tier three winner of MORE ().
Related:
A look into the MORE winner’s wallet activity showed the same pattern. It received BNB from a wash trading wallet that was ultimately selected as a winner, and it used those funds to finance its own succession of trades for another sponsor token. Again, when it finished wash trading, it shipped off the remaining BNB to another wallet that became a winner.
In a document shared with Cointelegraph, League of Traders identified 852 winners suspected of belonging to this cluster of wallets.
“They used the same funding source… and when the time to distribute the prize came, then all of these chain wallets all received the prize, which is very improbable,” League of Traders said.
PancakeSwap promotes the next trading competition
For projects that put up tens of thousands of dollars to sponsor the competition, the controversy highlights concerns about transparency in one of BNB Chain’s flagship platforms.
PancakeSwap recently concluded its third trading competition. This time, it wasn’t focused on Binance Alpha alumni and featured six tokens and $300,000 in rewards.
It on X, “2,040 random lucky winners have been rewarded with respective project tokens. Check your wallet to see if you’re one of them.”
PancakeSwap added that the next trading competition is “coming soon.”
Magazine:
