Allegations that centralized exchanges (CEX) "turn a blind eye" or facilitate internal manipulation often revolve around issues of transparency and conflicts of interest.
Common forms of internal manipulation and lack of transparency include:
Conflict of interest (Internal Market Making): CEX exchanges often wear multiple hats: they act as trading platforms, brokerage firms, and sometimes even market makers. This allows them to leverage user order book data to execute counter trades and profit from the liquidation of customers' leveraged positions.
Wash Trading: Some exchanges are accused of not properly monitoring or engaging in wash trading themselves to inflate fake trading volume, enticing investors and boosting the credibility of listed projects.
Insider Trading: Employees or persons associated with the exchange may have prior knowledge of upcoming coin listings or delistings, allowing them to trade ahead and causing losses for retail investors.
Liquidity Manipulation: Exchanges might use shady algorithms to widen the spread or slow down API responses during high volatility, preventing users from closing positions and leading to abnormal liquidations of assets. $RAVE
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