Wash trading
Wash trading is buying and selling the same asset at nearly the same time with no change in who ultimately owns it, producing trading volume that does not reflect real demand.[1] In memecoin markets it is used to push tokens up volume rankings and through launchpad milestones, and is sold as a service by market makers and volume bots.[1][4] US prosecutors have charged it alongside pump-and-dump schemes, in which the inflated price is then sold into.[5]
How it works[edit]
Chainalysis flags two on-chain patterns: an address that buys and sells within 25 blocks for amounts within 1% of each other at least three times, and a controller that funds five or more managed addresses whose buys and sells in a pool nearly cancel out.[1] It describes Volume.li, a paid bot service selling 24-hour volume packages from $50 to $100,000, which claimed $257.5 million in generated volume.[1]
Research[edit]
- Solidus Labs reported in September 2023 that token deployers and liquidity providers had wash-traded at least $2 billion on Ethereum-based decentralised exchanges since 2020, in nearly 70% of a sample of 30,000 pools.[2]
- Chainalysis estimated up to $2.57 billion in suspected wash trading on Ethereum, BNB Smart Chain and Base in 2024, an upper bound combining $704 million and $1.87 billion from its two heuristics.[1]
- Mongardini and Mei studied 34,988 meme coins on Ethereum, BNB Smart Chain, Solana and Base and found that 82.8% of those returning over 100% showed signs of artificial growth such as wash trading.[3]
- Szwajcok et al., examining 15 million coins launched on pump.fun, put wash trading at no less than 17% of trading transactions but about 1.32% of volume, and found wash-traded coins graduated from the Bonding curve at 2.0% versus 0.90% for others; the authors note this is a correlation.[4]
Regulation[edit]
In October 2024 US prosecutors in Massachusetts charged the market makers ZM Quant, CLS Global and MyTrade with wash trading NexFundAI, a token the FBI created for the sting, and charged Gotbit and its leaders over a similar scheme; 18 individuals and entities were charged and more than $25 million in crypto was seized.[5] CLS traders allegedly traded the FBI's token among bots from 23 August 2024 until its trading was disabled at law enforcement's direction.[6] The SEC alleged that promoter Vy Pham hired Gotbit for "market-manipulation-as-a-service", including generating artificial trading volume for the Robo Inu token.[8] Gotbit founder Aleksei Andriunin pleaded guilty and was sentenced to eight months in prison on 13 June 2025; the company received five years' probation.[7]
Timeline[edit]
- 2023-09-12: Solidus Labs publishes its DEX wash trading report[2]
- 2024-10-09: Market makers charged in the NexFundAI sting[5]
- 2025-01-29: Chainalysis publishes its 2024 wash trading estimate[1]
- 2025-06-13: Gotbit founder sentenced[7]
See also[edit]
References[edit]
- ^ Market Manipulation: Suspected Wash Trading on Select Blockchains May Account for Up To $2.57 Billion in Trading Volume, Chainalysis, 2025-01-29
- ^ Decentralized exchanges a magnet for crypto wash traders: Solidus Labs, Cointelegraph, 2023-09-13
- ^ A Midsummer Meme's Dream: Investigating Market Manipulations in the Meme Coin Ecosystem, arXiv (USENIX Security 2026), 2025-04-16
- ^ Meme Coin Factories: Uncovering Large-Scale Manipulations on pump.fun, arXiv (CCS '26), 2026-09-09
- ^ Eighteen Individuals and Entities Charged in International Operation Targeting Widespread Fraud and Manipulation in the Cryptocurrency Markets, US Attorney's Office, District of Massachusetts, 2024-10-09
- ^ FBI Made a Profit From Ethereum Token Created to Catch Fraudsters, Decrypt, 2024-10-10
- ^ Gotbit founder Aleksei Andriunin sentenced to 8 months following wash trading scheme, The Block, 2025-06-13
- ^ SEC v. Vy Pham, Litigation Release No. 26153, US SEC, 2024-10-15