Solidus Labs, a crypto trade surveillance and risk monitoring company, conducted an analysis of approximately 30,000 liquidity pools on Ethereum-based decentralized exchanges (DEXs). The findings revealed that 67% of these pools were manipulated by wash traders. Wash trading represented 16% of the total trading volume for these pools, amounting to at least $2 billion since September 2020.
Solidus Labs provided examples of how wash traders exploited DEXs to manipulate the prices and volumes of various tokens. One such instance involved SHIBAFARM, a meme token used in a scam that targeted speculators and resulted in losses exceeding $2 million.
In response to the prevalence of wash trading on DEXs, Solidus Labs has been developing solutions aimed at detecting and preventing market manipulation. These include tools like Token Sniffer, DEX-Based Insider Trading, and DEX-based A-A Wash Trading Detection.
PlusToken was a notorious Ponzi scheme that operated from 2018 to 2019, luring investors with promises of high returns for depositing cryptocurrencies into its wallet app. The scam victimized over 3 million people and managed to steal more than $2 billion worth of cryptocurrencies, primarily Bitcoin (BTC) and Ethereum (ETH).
According to Chainalysis, a blockchain analysis firm, the perpetrators of the PlusToken scheme were not only involved in defrauding investors but also engaged in market manipulation. They achieved this by selling significant amounts of the stolen crypto on exchanges, thereby exerting downward pressure on the price of Bitcoin.
Chainalysis estimated that PlusToken scammers liquidated a minimum of $185 million worth of Bitcoin between September and December 2019, a period that coincided with notable price drops in the cryptocurrency market.
The report highlighted that the scammers employed various tactics to obfuscate their activities, including the use of mixing services, decentralized exchanges, and over-the-counter (OTC) brokers, making it challenging to trace and apprehend those responsible for the scheme.
BitConnect was a cryptocurrency trading platform that purported to utilize a proprietary trading bot and volatility software to generate profits from fluctuations in the crypto market. Unfortunately, it turned out to be a Ponzi scheme that defrauded over 3 million victims, stealing more than $2.4 billion worth of cryptocurrencies.
Satish Kumbhani, the founder of BitConnect, who is 36 years old and from India, has been charged by a federal grand jury in San Diego with multiple offenses. The charges include fraud, price manipulation, money laundering, and operating an unlicensed money-transmitting business.
Kumbhani is accused of orchestrating the Ponzi scheme, where earlier investors were paid with funds from new investors. Additionally, he allegedly manipulated the price and volume of BitConnect’s native token, BCC, to create a false impression of market demand and attract more unsuspecting investors.
As of now, Kumbhani’s whereabouts are unknown, and the U.S. Securities and Exchange Commission (SEC) has been unable to locate him. If convicted, he could face a maximum sentence of up to 20 years in prison.
In November 2022, FTX faced a collapse due to a series of events revealing insolvency and fraudulent activities. The SEC filed a civil complaint against Caroline Ellison, the former CEO of Alameda, and Gary Wang, the co-founder and former CTO of FTX, for their involvement in the FTX debacle.
The SEC alleged that Ellison and Wang manipulated the price and volume of FTT, FTX’s native token, by using Alameda’s trading bots and accounts. They engaged in buying and selling FTT on FTX and other exchanges, creating a false impression of market demand and profitability.
Furthermore, the SEC accused Ellison and Wang of defrauding FTX customers and investors by making false and misleading statements about FTX’s financial health, security, liquidity, and regulatory compliance. These actions purportedly led to substantial losses for FTX customers and investors and contributed to the collapse of FTX, resulting in FTT losing over 90% of its value within days.
Ellison and Wang faced civil charges, including securities fraud, market manipulation, and aiding and abetting FTX’s violations of the Securities Exchange Act of 1934.
In December 2017, Bitcoin surged to nearly $20,000 after an unprecedented year of growth. However, research from the University of Texas at Austin suggested that this surge was influenced by market manipulation involving Tether (USDT), a stablecoin pegged to the U.S. dollar and issued by the crypto exchange Bitfinex.
The study, analyzing blockchain data of Bitcoin and Tether transactions, revealed that Tether was used to buy Bitcoin during periods of low demand, artificially supporting prices and inflating the value of Bitcoin.
Additionally, the research found that Tether was often issued in large amounts, surpassing the claimed cash reserves of Bitfinex, raising concerns about the legitimacy and backing of Tether.
The study concluded that Tether contributed to at least 50% of Bitcoin’s price increase in 2017, suggesting manipulation by a single entity or a coordinated group of traders.
The findings sparked controversy, with Bitfinex and Tether denying any wrongdoing, accusing the researchers of bias and flawed methodology.