To list or not to list, Part 1: Binance should not have listed SUSHI

Published at: Sept. 11, 2020

Chef Nomi has cooked up what appears to be the biggest exit scam of 2020, but should others be held accountable as well? Binance, like many other major exchanges, listed SUSHI raw and unaudited on Sept. 1. The token price doubled upon listing. The token contract was deployed on Aug. 26, it started trading two days later, and the first and only security audit was published on Sept. 3 (the firm confirmed to Cointelegraph that it had not discussed its audit of SushiSwap with Binance prior to publication).

Binance’s listing guidelines purport that the exchange does a lot of due diligence prior to listing a token:

“Binance has a rigorous screening process for listing, and projects failed to pass the review may be still in observation period.”

It begs the question: What kind of “rigorous process” could have been performed on an infant project in a matter of days?

Binance refused to discuss its listing of SUSHI with us. Johnny Lyu, the CEO of a rival exchange KuCoin, told Cointelegraph that his exchange decided against listing SUSHI on two separate occasions.

The exchange rejected the coin the first time because it did not believe SushiSwap provided any value to the community. KuCoin revisited its decision later, having noticed that most of the competing exchanges had already listed it. But it rejected it for the second time, having internally classified it as a Ponzi scheme.

It was not easy to find reputable people in the crypto community who were willing to publicly share their opinion about Binance’s role. Ethereum co-founder Vitalik Buterin was one of those people:

“I think it shows a lack of judgment; I think the main harm of Binance listing SUSHI comes from the fact that Binance listings are perceived as a form of legitimacy.”

He also added: “Right, so they definitely violated their own rules for SUSHI.”

When I asked about whether Binance should be held accountable for its role in the affair, Buterin said:

“I already made my position clear a while ago (Google “vitalik centralized exchanges burn in hell”) so difficult for me to say more. I do think that Uniswap itself has done a lot to make CEXes less relevant, which I think is a good thing. The challenge is that we need ‘some’ mechanism to perform this social legitimizing function. Basically something that people can by default look to as a sign of ‘ok this thing is not a total scam’. And CEXes never did that well because they have conflicting interests.”

Kyle Roche of Roche Cyrulnik Freedman told Cointelegraph that his firm started an investigation into the SUSHI affair and is investigating all the parties involved.

In a recent tweet, which was meant as a weekly community update, Binance mentioned the listing of SUSHI as one of its achievements. Well, at least, no one can accuse Binance of being inconsistent.

This is Part 1 of a two-part debate series exploring the question of whether or not Binance made the right decision in listing the token SUSHI on its exchange. Part 1 presents the opposing side, arguing that Binance should not have listed the token. Read Part 2 of the debate series defending Binance’s decision to list SUSHI here.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Michael Kapilkov lives in New York. He has been working in the blockchain space since 2015, founding, advising, speaking and writing. He currently teaches a blockchain course that he designed for MBA and master’s students at Pace University, and he mentors startups at the Columbia University–IBM Blockchain Accelerator.