Market Makers' Secret Token Loans Exposed: Transparency Crisis Hits Crypto

The token loan + call option deal has become a widespread practice in crypto market making. It works like this: a project hands a market maker a pile of tokens before or at listing, often for free, and the market maker provides liquidity on exchanges while retaining the right to sell those tokens into market demand.

However, the loan size, repayment conditions, and option strike prices remain between the two parties. This creates an information asymmetry problem, where retail buyers see volume and liquidity but are unaware that a chunk of circulating supply was loaned to a market maker with every financial incentive to sell into demand.

The call option component makes it even more lopsided: if the token price moons, the market maker can exercise the option and buy tokens at a pre-agreed price well below market. If the price tanks, they simply return whatever tokens remain.