The latest insider trading scandal on a crypto-native exchange couldn’t have landed at a more uncomfortable moment. On Tuesday, President Trump called on Congress to pass the Stop Insider Trading Act “without delay” during his State of the Union address — the same week on-chain investigator ZachXBT dropped evidence of an alleged scheme operating inside one of crypto’s most profitable trading platforms.

As insider trading and ethics reform take priority in the push to pass the CLARITY Act, the Axiom Exchange investigation arrives as a real-world illustration of exactly the compliance gaps critics say must be closed before broader market structure legislation gets a green light.

The target is Axiom Exchange, a Solana-based non-custodial trading terminal that went through Y Combinator’s Winter 2025 cohort and generated more than $390 million in cumulative revenue. It’s a good time to emphasize: Axiom Trade is not a CFTC-regulated platform.

The investigation centers on Axiom’s internal dashboard, which allegedly gave business development employees full visibility into user wallet histories, tracked addresses, transaction records, and linked accounts. Senior BD employee Broox Bauer allegedly used that access to identify private wallets belonging to known crypto influencers — traders who accumulate large memecoin positions from unlisted wallets before publicly promoting tokens — and position ahead of anticipated price moves.

1/ Meet @WheresBroox (Broox Bauer), one of the multiple @AxiomExchange employees allegedly abusing the lack of access controls for internal tools to lookup sensitive user details to insider trade by tracking private wallet activity since early 2025. pic.twitter.com/KwICQMJL1q

Evidence spans at least eight months. In April 2025, Bauer allegedly screenshotted an internal dashboard view of trader “Jerry’s” private wallets. By August, more screenshots had circulated in a private group, along with registration details and linked addresses for additional traders. The alleged offenders compiled a Google Sheet of key opinion leader wallets drawn from Axiom’s internal data. Multiple traders named in the leaked material independently confirmed the wallet attributions were accurate, according to ZachXBT’s post.

In a private call recording ZachXBT obtained, Bauer described tracking 10 to 20 wallets at a time to avoid suspicion and explained the lookup process to others in the group. Another Axiom BD employee, identified as Ryan (“Ryucio”), is also implicated in the recording.

ZachXBT noted that without access to Axiom’s internal logs, high-confidence proof of trading on those lookups is difficult to establish from on-chain data alone; the logs would need to correlate dashboard access timestamps against specific trade executions.

The crypto world was already pricing in the story before it published. A Polymarket on which company ZachXBT would expose generated more than $30 million in volume before the investigation published, with Axiom moving to 35% probability in European morning hours Thursday. Ironically, anyone with an early read on ZachXBT’s target had a front-running opportunity on the very market speculating about front-running.

ZachXBT says he notified the company before publication. Axiom co-founders denied knowledge of the conduct but pledged a review, saying on X: “We are shocked and disappointed to hear that someone on our team abused internal customer support tools to look up user wallets.” The team offered the following public statement:

We are shocked and disappointed to hear that someone on our team abused internal customer support tools to look up user wallets.

We have removed access to these tools and will continue to investigate and hold the offending parties responsible.

This does not represent us as a…

The more important finding isn’t Bauer individually. It’s that a business development role apparently carried dashboard permissions with complete wallet graphs, linked accounts, nicknames, and transaction histories, with no apparent monitoring in place. That’s not a rogue employee problem but a controls architecture problem.

In any CFTC-regulated derivatives exchange, information barriers between customer data and trading functions are a baseline compliance requirement. That goes for CFTC-regulated Kalshi, which also explicitly prohibits insider trading and has been ramping up monitoring and enforcement amid calls for more transparency. The platform recently expanded its surveillance framework with an independent advisory committee and dedicated enforcement head in direct response to growing scrutiny of the prediction market sector. The company has also begun publishing results of some such investigations, though so far the publicly released findings are sparse.

However, the alleged Axiom breech was not a case of insider trading like those that Kalshi has been publicly addressing, but rather an internal controls issue that would theoretically not be possible under CFTC regulation.

The CFTC oversees extensive regulatory requirements and monitoring for regulated exchanges, and its new chair Michael Selig has defended the commission’s processes in public statements. Selig noted in his recent WSJ op-ed, “These exchanges aren’t the Wild West, as some critics claim, but self-regulatory organizations that are examined and supervised by experienced CFTC staff.” He also highlighted surveillance requirements, anti-money-laundering rules and fraud prevention obligations as evidence the markets operate within established financial regulatory guidelines.

Axiom Exchange sits outside of CFTC jurisdiction entirely. There’s no CFTC rule requiring it to maintain information barriers, no mandated surveillance program, and no established legal definition of “insider trading” in a memecoin context. In fact, memecoins are not securities (SEC Rule 10b-5 doesn’t apply) and they’re not CFTC commodity contracts either. As we’ve previously covered, the CFTC’s regime is different from the SEC’s, and neither maps cleanly onto what happened here.

What could map cleanly is wire fraud. Bauer is based in New York, which puts potential prosecution under the Southern District of New York, as ZachXBT points out. If prosecutors can establish that interstate communications were used to deprive users of something of value (like their trading edge, derived from their private wallet data), that could present a viable federal case regardless of whether the underlying assets are securities.

Industry observers have been arguing for weeks that ethics and insider trading reform may need to land before the CLARITY Act can realistically pass. DonaFi CEO Joshua Kim put it plainly: “If the administration can show it tightened guardrails before greenlighting structural reform like CLARITY, critics have less ammo.”

The Axiom investigation drops straight into that argument. It demonstrates, with specific receipts, that crypto platforms operating outside of regulated walls can and do expose users to the kind of conduct the Stop Insider Trading Act is designed to address. That’s exactly the ammunition skeptics will use to argue that broader structural legislation is premature, and more guardrails are needed first.

The blockchain transparency paradox is worth noting here. Non-custodial platforms are sold on the premise that users control their assets and their privacy. What the Axiom case illustrates is the inverse exposure: a DEX terminal that retains rich off-chain identity data including referral codes, UIDs, and wallet linkage graphs with no user visibility into how that data is being accessed internally. The public ledger doesn’t protect anyone if the platform holds a private map connecting pseudonymous wallets to real identities, accessible to anyone with a BD login.

This is structurally distinct from the insider trading allegations that have surfaced on Polymarket in recent months, where the concern is traders with external information advantages. The Axiom scheme is platform-side: employees weaponizing their own infrastructure against users.

It’s a harder problem to defend against without deliberate access controls, and exactly the kind of failure that hands regulators a concrete, documented example when making the case that self-regulation isn’t enough. For months, critics of the CLARITY Act have argued that handing crypto platforms a federal framework without first establishing baseline conduct standards is premature. The Axiom case gives those critics something more useful than a theoretical argument: a named employee, a named platform, a recording, and a spreadsheet as documented proof.

But it cuts both ways politically. On one hand, it strengthens the case for passing the Stop Insider Trading Act before, or alongside, broader market structure legislation, exactly the sequencing that some industry observers have been flagging as the more realistic path forward. On the other, it’s a live illustration of why federal clarity is needed in the first place.

Right now there is no clean legal framework that covers what Axiom employees allegedly did. Memecoins aren’t securities. They aren’t CFTC commodity contracts. The gap between those two jurisdictions is where schemes like this operate. Federal regulation doesn’t just restrict bad actors; it also defines them. Without a statutory framework that says what conduct is prohibited and who enforces it, the best available remedy is a wire fraud charge and reputational damage via X, which is not a compliance regime.

If the industry wanted to design a case study for why crypto needs federal guardrails before it gets federal legitimacy, it would probably look a lot like this. A profitable platform, trusted by users who believed non-custodial meant private, allegedly turned into a surveillance tool by its own employees.

The CLARITY Act debate has always been about more than market structure. It’s also about whether crypto can be trusted to govern itself. The Axiom investigation brings that question sharply into focus for industry observers, regulators and politicians alike.

The post Axiom Insider Data Abuse Allegations Expose Crypto Compliance Gaps appeared first on DeFi Rate.

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