The U.S. Department of Justice (DOJ) is charging the founder and CEO of crypto firm Gotbit with wire fraud and conspiracy to commit market manipulation and wire fraud. In a new press release, the U.S. Attorney’s Office of the District of Massachusetts is alleging that 26-year-old Russian national Aleksei Andriunin and two Gotbit directors offered […]
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The U.S. Securities and Exchange Commission (SEC) has charged multiple market makers and individuals with manipulating crypto asset markets, alleging they created fake trading activity to mislead retail investors. These schemes, including practices like wash trading, aimed to fabricate the illusion of active trading, violating securities laws. The SEC seeks penalties, including bans and disgorgement, […]
Manipulated trading volumes are rampant on some crypto exchanges. Here are three ways to use data to avoid being washed out.
Identifying fake liquidity in Bitcoin (BTC) and cryptocurrencies is essential for traders aiming to avoid being surprised by sudden sharp declines in low volume.
These make it virtually impossible to execute stop losses and usually lead to unexpected results. By analyzing how market makers are organized, order book mechanics, and a handful of practical indicators that can detect artificial volume, traders can spot potential red flags and avoid unwanted consequences.
Market makers play a pivotal role in the crypto markets by providing liquidity through multiple buy and sell orders. However, their activities are not always benign. Those entities might manipulate the market by placing large orders near current prices to create a misleading appearance of demand or supply, known as spoofing, or engage in wash trading—simultaneously selling and buying the same assets to inflate volume figures.
Token deployers and liquidity providers wash-traded over $2 billion worth of crypto on Ethereum-based DEXs since 2020, a Solidus Labs report claims.
Over 20,000 crypto tokens have been manipulated via decentralized exchange (DEX) wash trading in the last three years, according to market surveillance firm Solidus Labs.
In the second part of its 2023 Crypto Market Manipulation Report released Sept. 12, Solidus said among a sample of 30,000 Ethereum-based DEX liquidity pools, nearly 70% were found to have executed wash trades since September 2020 — making up for around $2 billion worth of crypto.
Wash trading is a form of market manipulation where an entity buys and sells the same asset giving the false impression of market activity.
Major Update! Unveiling Part Two of our Crypto Market Manipulation Report! Our data shows a shocking $2 billion #washtrades on DEXs since Sept 2020. That's affecting over 20,000 tokens! ⚠️
— Solidus Labs (@Solidus_Labs) September 12, 2023
Full details here in our report: https://t.co/pcRvMBGfb0
Wash trades are present in traditional finance, however, Solidus argued market manipulators often have easier means to do so when it comes to crypto.
“In crypto, liquidity is fragmented across a variety of centralized and decentralized exchanges, resulting in smaller markets that are easier to manipulate.”
There’s also an ongoing regulatory question over who is responsible for on-chain wash trading detection and prevention — likely given the borderless nature of decentralized finance.
"Market manipulation remains a significant challenge within the crypto industry, especially in an era of greater regulatory scrutiny and institutional adoption," Solidus founder and CEO Asaf Meir said in a statement.
"The wash trading activity we have unearthed here is a clear sign of market manipulation, and it must be prevented for crypto and DeFi to flourish.”
Solidus explained wash traders come in all shapes and sizes, from token deployers looking for an easy rug pull; to speculators attempting to game an upcoming token airdrop; to exchange and marketplace operators reporting higher trading volumes to attract investors and users.
Related: NFT wash trading increases by 126% in February: Data
In 2022, a National Bureau of Economic Research study suggested more than 70% of unregulated exchange volumes were wash trades.
According to the researchers, there are short-term incentives for wash trading and suggested fake transactions often impact the rankings of the exchanges on data and statistics websites such as CoinMarketCap and CoinGecko.
In addition, fake transactions also affect the crypto prices within the exchanges over the short term.
Hodler’s Digest, Sept. 3-9: Binance’s exec exodus, Nasdaq to trade AI orders and SBF loses bail appeal
While several theories emerged, the Binance CEO asserted that no BTC or BNB trading activity is happening behind the scenes.
Binance CEO Changpeng “CZ” Zhao has refuted accusations that Binance has been secretly selling Bitcoin (BTC) to artificially stabilize the price of its native token Binance Coin (BNB).
The rumors have come from several market commentators, including analyst Dylan LeClair and Swan Bitcoin CEO Cory Klippsten, who have accused Binance of intentionally manipulating the market to artificially inflate the value of BNB.
In a June 13 tweet, CZ said that Binance had not sold any of their BTC or BNB, adding that the crypto exchange still held “a bag” of FTX Token (FTT) — the native token of the now-defunct crypto exchange FTX.
4. Binance have not sold BTC or BNB. We even still have a bag of FTT.
— CZ Binance (@cz_binance) June 13, 2023
It is amazing they can know exactly who sold based on just a price chart involving millions of traders. FUD. ♂️ pic.twitter.com/M3MUH2bFRE
“It is amazing they can know exactly who sold based on just a price chart involving millions of traders. FUD,” he added.
CZ’s post was direct response to a June 14 post from technical analysis platform Skew, which accused Binance of manipulating the market through a series of trades involving BTC, BNB and Tether (USDT):
“Binance is definitely up to something here to prevent BNB from crashing as well as BTC.”
In the same thread, Bitcoin analyst Dylan LeClair claimed that “BNB is clearly a fake market” which is trading with less realized volume than BTC.
In a June 13 tweet, Cory Klippsten, the CEO of Swan Bitcoin also alleged that Binance was engaging in “wash trading,” and claimed that Binance is “trying to pretend” there’s support for BNB:
Wash trading like craaaaaazzzzyyyyy on Binance right now trying to pretend there’s support for BNB. This looks sooooooo bad for CZ.https://t.co/qCHjQCSXwD
— Cory Klippsten ️ Swan.com #Bitcoin (@coryklippsten) June 12, 2023
Wash trading is a market manipulation tactic where a trader sells an asset and then buys it shortly after to inflate its demand or make it look like there's more activity in the marketplace.
Analyst Joe Consorti from The Bitcoin Layer also described BNB’s price action as “unusual” with the “$220 level” being “staunchly defended.” He suggested that it may be a liquidation level for a BNB-collateralized loan.
Unusual price action on Binance.
— Joe Consorti ⚡ (@JoeConsorti) June 13, 2023
Loads of selling pressure on bitcoin not present on other exchanges.
More cannon fodder that they may be selling spot BTC to prop up BNB.
The $220 level is being staunchly defended — may be a liquidation level for a BNB-collateralized loan. https://t.co/EYfLJ1KIcX pic.twitter.com/7XGNLlzcpf
In response to CZ’s post, Consorti asserted that Binance should publish an audited statement proving that Binance has no BNB-collateralized liabilities in order for the “FUD” to end.
Related: 70% of unregulated exchange transactions are wash trading: NBER study
The United States Securities and Exchange Commission sued Binance.US on June 5 for allegedly breaking securities laws in addition to engaging in wash trading through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” which is owned by CZ.
CZ and Binance.US have denied any wrongdoing and intend on “vigorously” defending the charges laid against them in the U.S. District Court in Washington D.C.
Magazine: US and China try to crush Binance, SBF’s $40M bribe claim: Asia Express
Court documents reveal that Justin Sun, Tron’s founder, has been sent a summons from the U.S. Securities and Exchange Commission (SEC) regarding the civil complaint filed against him last month. Youtuber Austin Mahone and rapper Soulja Boy, whose real name is DeAndre Cortez Way, have also been summoned. The SEC accuses Sun of orchestrating an […]
Some pundits have argued the trader mistakenly put up a bid for 100 ETH which was quickly snapped up, while others believe the sale was a wash trade.
A nonfungible token (NFT) trader has seemingly fat-fingered a bid for a free NFT, buying it for 100 Ether (ETH), currently valued at $191,239, instead of nothing.
The token was part of NFT marketplace OpenSea’s Gemesis NFT collection — free NFTs intended to commemorate the launch of OpenSea Pro on April 4. The trader's bid is a 250,000% increase on the floor price of 0.04 ETH.
OpenSea Pro is a marketplace aggregator tailored to professional users by providing them with what OpenSea calls “a vastly improved” suite of features such as live cross-marketplace data and advanced orders.
While some have argued the sale was wash trading, Twitter user “0xSun” believed the sale — which occurred on the NFT marketplace Blur — happened because the trader wanted to bid $100 as an amount, but accidentally bid 100 ETH instead.
Yeah someone else put the 100ETH bid by mistake (He probably want to bid 100 as amount) and it got accepted by another one with 1500+ gwei gas
— 0xSun (@0xSunNFT) April 5, 2023
A Reddit user who posted about the sale also cast doubt on the wash trading theory, arguing it was an open offer that was available to anyone, making it too risky to be a wash trade as another trader or bot would quickly snap up an offer so far above the floor price.
“I know what you guys are thinking it was a wash trade but this was an open offer that could have been accepted by anybody, so it would be a pretty big risk hoping you were faster than anybody else looking at the offers at that moment.”
Wash trading is a form of market manipulation in which a trader buys and sells an asset to feed misleading information to the market. The practice is illegal in traditional stock markets but is very prevalent in NFT trading.
Related: NFTs in the event and ticketing industry: How can it sustain millions of users?
OpenSea acquired NFT aggregator Gem for an undisclosed amount on April 25, 2022, and refined the platform in order to create OpenSea Pro.
Only users who bought at least one NFT on Gem prior to March 31 are eligible to mint a Gemesis NFT, with the minting window set to close on May 4.
NFT Creator, Sarah Zucker: The Sarah Show’s analog past meets dizzying digital future
The U.S. Securities and Exchange Commission (SEC) has taken action against Justin Sun, the founder of Tron, and the Tron Foundation, issuing charges for offering unregistered securities and market manipulation. Additionally, a group of influencers have been charged by the organization for promoting tron without disclosing that they were being compensated for their endorsements. Tron […]
The majority of centralized exchange volume is fake, according to the billionaire investor and Dallas Mavericks owner.
Crypto token wash trading on centralized exchanges will be the cause of the next crypto “implosion,” according to billionaire Dallas Mavericks owner and crypto investor Mark Cuban.
In an interview with The Street on Jan. 5, the billionaire investor opined that 2023 will not be short of crypto scandals following the numerous fiascos that rocked 2022.
Cuban, who has backed several crypto and Web3 startups, said he believes the next biggest thing to impact the industry will be "the discovery and removal of wash trades on central exchanges.”
“There are supposedly tens of millions of dollars in trades and liquidity for tokens that have very little utilization,” he said before adding, “I don't see how they can be that liquid.”
Wash trading, which is illegal under U.S. law, is a process whereby a trader or bot buys and sells the same crypto asset to feed misleading information to the market.
The goal is to artificially inflate volumes so that retail traders jump on the bandwagon and push prices up. In essence, it is a pump-and-dump scheme.
Cuban said it was just a prediction, adding “I don't have any specifics to offer to support my guess.”
As much as 70% of the volume on unregulated exchanges is wash trading according to a December report by the National Bureau of Economic Research (NBER).
Researchers used statistical and behavioral patterns to determine which transactions were legitimate and which ones were spurious.
Furthermore, a 2022 study by Forbes on 157 centralized exchanges found that more than half the Bitcoin trade volumes were fake.
Related: Mark Cuban to Bill Maher: ‘If you have gold, you’re dumb as fuck... Just get Bitcoin.’
Wash trading isn’t just limited to centralized exchanges, however. On Jan. 5, Quantum Economics CEO and former eToro senior market analyst, Mati Greenspan, said that 42% of all NFT volume is wash traded.
Yeah. It's 2023 and we're still talking about wash trading. https://t.co/y9kiLbu4Eu
— Mati Greenspan (@MatiGreenspan) January 5, 2023
He added that wash trading is also used to harvest tax losses, making it appear (to the taxman) that there has been a greater loss than in reality.
The researchers found that in some exchanges, the wash trading volume can go as high as 80%.
With exchanges becoming a focus as the FTX fiasco continues, a new research paper suggested that almost three out of four transactions in unregulated exchanges are fake.
A working paper titled “Crypto Wash Trading” was recently published by the National Bureau of Economic Research (NBER). Using statistical and behavioral patterns to determine which transactions were legitimate or not, the paper studied 29 unregulated exchanges and came to a conclusion that, on average, more than 70% of the volume within the platforms are wash trades.
The researchers found that some exchanges’ wash trading volume goes as high as 80% of the total trading volume. The researchers wrote that in twelve “tier-2 exchanges,” wash trades amounted to almost 80% of the total trade volume. The researchers wrote:
“These estimates translate into wash trading of over 4.5 trillion USD in spot markets and over 1.5 Trillion USD in derivatives markets in the first quarter of 2020 alone.”
According to the researchers, there are short-term incentives for wash trading. The study suggested that fake transactions often impact the rankings of the exchanges on data and statistics websites like CoinMarketCap. In addition, fake transactions also affect the crypto prices within the exchanges over the short term.
Related: 40% of 40K respondents plan to buy crypto in 2023: Blockchain.com survey
Meanwhile, the FTX debacle continues to gain attention as wallets linked to Alameda Research have shown movements, funneling around $1.7 million in assets through crypto mixers. The movements were observed days after the former FTX CEO Sam Bankman-Fried was released on a $250 million bond.
As the FTX collapse damaged people's trust in centralized exchanges (CEXs), executives working on CEXs have voiced their sentiments on how they could win back user trust. On Nov. 25, Cointelegraph spoke with various leaders within crypto exchanges and found that many are positive that the industry can still recover post-FTX.
