Several crypto exchanges stole about $100 million from aspiring token projects in 2018 through the means of wash trading, a new study revealed.
Blockchain Transparency Institute (BT), a group of blockchain forensic specialists, collected information from multiple token projects about the sums they paid to cryptocurrency exchanges for listing. It found that the projects spent as much as $50,000 in the listing fees and bore additional transaction fee costs charged by their exchanges.
“This adds up to an estimated $100,000,000 stolen in 2018 from the crypto ecosystem.. and with over 50 exchanges we’ve estimated wash trading over 95% of their volumes, this is a 500K a year scheme, with some making over a million dollars this year just from collecting these fees,” the BTI research revealed.
OKEx, BitHumb, Huobi Post Fake Trading Volume
The exchanges used four different bot strategies for artificially inflating their volume. After studying these strategies, alongside the order books, volume data points, and other datasets, BTI noted that the trading platforms mostly focused on the top 25 bitcoin trading pairs on CoinMarketCap. It claimed that only 1% of the reported volume of CMC was actual volume while the rest of it was artificial.
BTI algorithms found world renowned exchanges like OKEx, BitHumb, HitBTC, and Huobi engaged in wash trading, stating that they benefited the most from CMC referral traffic.
OKEx, for instance, engaged in wash trading among all its top 30 traded tokens. Huobi also appeared to have inflated the volumes of its top 30 pairs. The same is true with HitBTC which swelled the trading volume of its top 25 pairs artificially. As for BitHumb, the BTI study said:
“We checked into Bithumb after numerous reports and found a large amount of wash trading primarily with Monero, Dash, Bitcoin Gold, and ZCash. Top wash traded tokens on Bithumb appear to change depending on the month.”
The group has listed every exchange it believes is involved in wash trading to its advisory list. It also announced that it would publish its Initial Investor Security Report which will highlight current exchange security measures and ways in which the crypto space can protect its investors’ funds.
What About Coinbase, Binance, and BitFinex?
The BTI report also named exchanges that were not involved in any kind of trading frauds. It found that the reported volumes of Binance and BitFinex exchanges were the same as their actual trading volumes, meaning they are working in plain sight. Coinbase also didn’t make it to the BTI advisory list, proving that it is working well within legal parameters.
“We have calculated the true volume of the CMC top 25 BTC trading pairs. Most of these pairs actual volume is under 1% of their reported volume on CMC. We noted only 2 out of the top 25 pairs not to grossly wash trading their volume, Binance and Bitfinex,” BTI wrote.
