Tag: Wash Trading

NFT Wash Trading Volume Surges to $580M Across Top Six Marketplaces

by Blockchain News

In February 2023, the top six nonfungible token (NFT) marketplaces experienced a significant surge in NFT wash trading, with a total volume of $580 million, up 126% from the previous month. The six marketplaces included in the report were Magic Eden, OpenSea, Blur, X2Y2, CryptoPunks, and LooksRare. Of these, X2Y2, Blur, and LooksRare played the largest roles in February’s volume for NFT wash trading, with $280 million (49.7%), $150 million (27.7%), and $80 million (15.1%), respectively.

NFT wash trading is the manipulation of trade volume or price through repeated transactions. While this practice is illegal in traditional financial markets, the lack of clear regulations in the crypto space has allowed it to occur in both the broader crypto market and with NFTs.

The CoinGecko report revealed that NFT wash trading made up a combined 23.4% of “unadjusted trading volume” across the industry’s six largest marketplaces. The report also noted that some of these marketplaces have incentivized users to increase trading volume via transaction rewards.

It’s worth noting that NFTs have become increasingly popular in recent years as a new form of digital asset ownership. They can represent anything from artwork to music and even tweets. The unique characteristics of NFTs, such as their limited availability and authenticity, have contributed to their popularity.

However, NFT wash trading has become a major concern for the industry, with many experts warning of its potential impact on the market. Back in January 2023, crypto investor Mark Cuban said that wash trading would cause the next “implosion” in the crypto market. In response to this issue, new artificial intelligence-based technology has surfaced, which aims to troubleshoot issues in the NFT market, including wash trading.

In addition to the rise of NFT wash trading, a recent scam has also surfaced in the NFT market. On March 16, 2023, fake Blur token airdrop websites were discovered, from which $300k was successfully stolen. The incident highlights the need for better regulation and security measures in the NFT market.

In conclusion, while the rise in NFT wash trading volume may be a sign of the market’s recovery, it also highlights the need for increased regulation and security measures to protect investors and prevent fraudulent activities.

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SEC takes action against two meme stock wash traders

by Cointelegraph

The U.S. Securities and Exchange Commission has filed a complaint against two Robinhood users over an alleged wash-trading-based arbitrage scheme that utilized meme stocks.

According to a Sept. 27 complaint, defendants Suyun Gu and Yong Lee took advantage of differing trading fee schedules offered by different retail brokers and exchanges to extract arbitrage while wash-trading.

By trading between venues that offer rebates to market makers and those that do not charge fees to market takers, the SEC estimates they generated more than $1.5 million worth of rebates in total through the alleged wash trading scheme.

Gu and Lee are believed to have been able to keep nearly half of the rebates as profits, with the commission estimating they profited $668,671 and $51,334 respectively while wash-trading during February through April of this year. The pair are believed to have executed 11,400 and 2,300 trades through the scheme respectively.

The pair are accused of targetting put options contacts for popular meme stocks including GameStop (GME) and AMC Entertainment (AMC). According to the complaint:

“Gu and Lee Believe that other marker participants’ interest in buying ‘meme stocks’ and related price increase would make put options on those stocks less attractive, making it easier for Gu and Lee to trade with themselves.”

While the trading venues used by the pair are not explicitly named in the court documents, it appears the pair were using the popular fee-free investment app Robinhood. The documents state that Gu concocted the scheme after watching the CEO from “Broker-dealer B” outline in a February court testimony that his firm does not charge taker fees to its customers — the same month that Robinhood CEO Vlad Tenev testified before congress regarding market volatility related to GME and other meme stocks.

Related: SEC is ‘open to discussion’ when it comes to crypto: Kraken chief lawyer

So-called “meme stocks” like AMC and Gametop became widely popular as a result of the Robinhood and Reddit-based pump and dump group r/wallstreetbets saga earlier this year.

Robinhood was the subject of controversy in January after the platform halted trading on GME amid the notorious short squeeze against hedge funds that was led by the fiery-eyed Reddit community r/wallstreetbets.

The group responded by immediately converging on crypto, with Dogecoin pumping by 980% on January 28 — the same day that Robinhood acted to dampen the frenzied meme stock speculation.

Robinhood has since estimated that Dogecoin accounted for 62% of its crypto revenues during Q2.