market manipulation

University of Sussex Researchers Say Blatant Market Manipulation is a Disaster to Traditional Safe Havens

The University of Sussex Business School recently published an analysis indicating that widespread market manipulation is a serious problem that regulators should deal with so that to confront false prices and avoid distorting the minds of investors.

According to the report, the COVID-19 pandemic has created huge volatility in global financial markets. But as one might expect, prices of safe-haven assets like Bitcoin and gold are not surging, a problem that is caused by large-scale and intense manipulation.

Insider dealing and market abuse

In recent months, the CryptoMarketRisk team at the University of Sussex Business School has been tracking trades on these markets and have identified massive dump and pump on copper futures, huge sell orders on gold futures, and large spoofing orders on key cryptocurrency exchanges.

The team identified that some single trade on COMEX has been so huge as to move prices, which is a clear contravention of US laws on market abuse. The COMEX, commonly known as The Commodity Exchange, is a division of the New York Mercantile Exchange, which trades futures in metals like aluminum, silver, gold, and copper.

The rampant market turmoil implies that regulators like the Commodity Futures Trading Commission (CFTC) have a lot of work to do as large-scale manipulation of such markets remain below the surveillance of regulators.

Carol Alexander, a professor at the Business school said, “As funds flow out of equities, one would expect demand for gold and Bitcoin to increase. But this time around, safe havens have behaved completely differently. Gold and Bitcoin have fallen at the same time as US equities. As the S&P 500 crashed in March 2020, gold had its worst week in eight years when it should have been the best, because of massive shorts on COMEX gold futures. Bitcoin has also been driven down by some pretty obvious manipulation bots on the unregistered crypto derivatives exchanges, especially BitMEX.”

Alexander added that the world is experiencing financial market manipulations on a frequency and scale that have rarely been witnessed before. The professor mentioned that a few powerful market players lack integrity, a phenomenon causing a major financial market meltdown of the current global economy.

Beyond those placing the trades, the biggest beneficiaries of such market attacks are holders of US assets and US dollars. These become the key sources of positive returns for global investors attempting to curtail the recent trend of some central banks to diversify their reserve holdings away from the US dollar.

Bitfinex and tether face market manipulation class-action lawsuit

With the expansion of crypto markets and also the existence of several sellers and buyers who are looking to gain from their trades, manipulation has taken a new display. Forgers are able to manipulate the trading activities of the crypto market and provide a false display and mislead investors and encourage them to buy their digital assets. Manipulation is an obstacle to market depth and a serious concern to investors.

Last year, New York-based legal firm Roche Freedman filed a lawsuit against Tether and Bitfinex for crypto manipulation and creating bubbles to profit from boom and bust cycles they created. The lawsuit stated that Tether and Bitfinex were involved in money laundering, pumping, and dumping cryptocurrencies, and engaged in a sophisticated scheme to defraud investors. It is, therefore, upon regulators’ responsibility to protect crypto consumers and investors and promote an environment of innovation to maximize the potential of blockchain technological advances.

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Bitcoin’s Price Boom is Artificially Inflated, says Peter Schiff

Popular Bitcoin critic, Peter Schiff, once again has tainted Bitcoin negatively by describing its recent rally from $9,100 levels to hit $9,600 as a mere surge driven by market manipulation. He was responding to a comment tweeted by the CEO and co-founder of Gemini Exchange, Tyler Winklevoss, who posted that Bitcoin recorded a steller rally and has defied the doubt, uncertainty, and fear thrown by Goldman Sachs investment bank advising against investing in cryptocurrencies and Bitcoin.

Bath Salts to Bitcoin

Bitcoin has seen a strong recovery in the previous few days from lows of about $8.6k. At the time of publication, Bitcoin price sits comfortably above $9,600. But the most interesting thing is that such a rally normally faces public criticism as was recently pointed out by Goldman Sachs. Peter Schiff is also not convinced that Bitcoin price is authentic. He believes that mysterious Bitcoin whales are the ones who are influencing Bitcoin prices.

Schiff believes that whales are manipulating Bitcoin prices so that to downplay the impact of Goldman Sachs’s criticism. In his response, Schiff claimed that whales such as Winklevoss are intentionally manipulating the price of Bitcoin to downplay the significance of Goldman’s bad news. He then described Bitcoin as a pyramid scheme, which is running low on the supply of fools like Tyler Winklevoss who are pumping the price to keep rising.

Tyler Winklevoss then responded to Schiff by sarcastically saying that the supply of fools will not run out so long as individuals like Peter Schiff are around.

Though Tyler Winklevoss and Peter Schiff are at loggerhead with the claims of price manipulation, they both believe in two assets, which are stores of value: Bitcoin and gold respectively. The two gentlemen have on several occasions expressed their distrust in the actions taken by the Federal Reserve to continually print US dollars in an effort to offset the economic impact of the COVID-19 pandemic. They both agree that the ongoing money printing amid the coronavirus pandemic will cause a paradigm shift in the global economy.

They, therefore, advised their followers to invest in store of values such as Bitcoin and gold because fiat money will devalue ultimately. Schiff recently advised investors to buy silver and gold as a hedge against the inflation that he sees caused by the monetary expansion. Last month, Winklevoss said that the action by the federal reserve to print more money has set the ground for the increase of Bitcoin prices.

In the current difficult environment, market experts know the significance of storing and growing wealth in hard assets like gold and Bitcoin, which are not correlated to the traditional stock markets, thus immune to inflation.

“I Knew Owning Bitcoin Was A Bad Idea”, Claims Peter Schiff

Peter Schiff is a gold advocate, renown economist, and widely known investment professional who has been a strong critic of Bitcoin for several years. In January 2020, he tweeted that he could not access his Bitcoin wallet because of his invalid password and thus lost all his Bitcoin. This was a proof for him that owning cryptocurrency was a bad idea. He emphasized that he did not forget the password, but the wallet did not recognize the correct one. However, many people believe that Schiff may have orchestrated the whole event to simply deter others from investing in Bitcoin.

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Binance faces investor backlash and Bitcoin withdrawals following CFTC lawsuit

The United States Commodity Futures Trading Commission (CFTC) recently filed a lawsuit against Binance, one of the world’s largest cryptocurrency exchanges, and its CEO, Changpeng “CZ” Zhao, for alleged regulatory violations. In response to the allegations, CZ denied any market manipulation by Binance, but investors were quick to respond with a significant move of assets away from the exchange.

Within 24 hours of the lawsuit announcement, investors withdrew over 3,400 BTC from Binance, anticipating market fluctuations and seeking to lessen the potential impact of a Binance shutdown. The move by investors led to a reduction in Binance’s total Bitcoin balance, which was reduced by over 3,900 BTC in the past week. In contrast, competing exchanges such as Coinbase, Bitfinex, and Gemini saw an increase in BTC reserves during the same 24-hour timeframe.

While CZ maintains that Binance does not trade for profit or manipulate the market, recent episodes involving other crypto entrepreneurs, such as FTX’s Sam Bankman-Fried and Terraform Labs’ Do Kwon, have shaken investor confidence in the cryptocurrency ecosystem.

It is also worth noting that Bitcoin balances on major crypto exchanges have declined since March 20, with nearly 27,000 BTC leaving these exchanges over the past week. The reasons behind this trend are not entirely clear, but it may be due to a combination of factors, including increasing regulatory scrutiny and concerns about the overall cryptocurrency market.

Alongside the CFTC’s lawsuit against Binance and CZ, a federal judge temporarily halted a proposed deal between Voyager and Binance.US. This move indicates that regulators are taking a closer look at the cryptocurrency industry and may be ramping up their efforts to enforce existing regulations and prevent fraudulent activities.

Overall, the recent events surrounding Binance and the wider cryptocurrency market have raised concerns among investors and regulators alike. While the long-term impact of these developments remains to be seen, it is clear that the cryptocurrency industry is facing increased scrutiny and may need to adapt to evolving regulatory requirements to continue its growth and development.

5 Charged for Hydro Token Market Manipulation

The US Department of Justice (DOJ) has charged five individuals with conspiring to manipulate the market in relation to an alleged scheme involving the Hydro (HYDRO) token. The charges include conspiracy to commit securities price manipulation and wire fraud. The three individuals charged with manipulating the market for Hydro are Michael Ross Kane, the former CEO of Hydrogen Technology Corp.; Shane Hampton, Hydrogen’s chief of financial engineering; and George Wolvaardt. The other two individuals were charged separately for their alleged roles in the scheme. Tyler Ostern, the former CEO of Moonwalkers, and Andrew Chorlian, a blockchain engineer from Hydrogen Technology Corp., were also charged for their involvement in the alleged manipulation scheme.

According to the indictment, from June 2018 through April 2019, Kane, Hampton, and Wolvaardt defrauded market participants looking to trade the Hydro tokens that Hydrogen issued. Wolvaardt, who was the chief technology officer for a market-making firm called Moonwalkers Trading Limited, designed a trading bot that executed a number of high-value “spoof orders” at obscure intervals to make it appear as though there was high demand for the token. The bot also bought and sold large volumes of the token from the same account, a practice known as wash trading.

The alleged manipulation of the Hydro token price resulted in the co-conspirators making an approximate total of $2 million in ill-gotten profits. The DOJ claims that following the artificial manipulation of the token’s price, the co-conspirators sold large chunks of their holdings.

Kane, Hampton, and Wolvaardt have each been charged with one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud. If found guilty on all charges, they each face a maximum penalty of five years imprisonment in relation to the conspiracy to commit securities price manipulation charge and a staggering 20 years in prison on each of the other charges. Ostern and Chorlian have each been charged with one count of conspiracy to commit securities price manipulation and wire fraud. If found guilty, they face a maximum penalty of five years in prison.

In a separate case brought by the Securities and Exchange Commission, Hydrogen Technology Corporation and former CEO Michael Ross Kane were ordered to pay $2.8 million in remedies and civil penalties. On April 20, a New York District Court judge ruled against Hydrogen Technology Corporation and Kane in the case. The SEC alleged that Hydrogen and Kane had made false and misleading statements to investors about the company’s financial performance and the development of its technology.

In conclusion, the charges against the five individuals for market manipulation of the Hydro token highlight the importance of transparency and fairness in the cryptocurrency market. The DOJ’s efforts to prosecute individuals who engage in fraudulent activities in the cryptocurrency market sends a strong message that such activities will not be tolerated.

Celsius Creditors Seek Help from Bankruptcy Judge to Uncover Potential Market Manipulation

Creditors of Celsius Network have requested the help of a bankruptcy judge to investigate potential market manipulation of Celsius’ CEL token. The creditors, represented by a committee, are seeking information from cryptocurrency exchange FTX regarding users associated with 10 wallets that were allegedly involved in suspicious trades of the CEL coin between April and August 2022. The creditors suspect that the trades may have artificially inflated the price of the CEL token and want to determine if they were legitimate or constituted market manipulation, such as wash trading.

To identify the suspicious transactions, the committee employed the services of blockchain consultant Elementus. According to Elementus, 947 transactions involving a near one-to-one relationship of CEL token deposits and withdrawals occurred over three-day periods between 10 private wallets and 10 FTX-operated wallets. The committee believes that the information from FTX will be crucial in determining whether the trades were intended to inflate the price of CEL token artificially.

In addition to uncovering potential market manipulation, the committee is also requesting information regarding any short positions taken on CEL. The committee believes that short positions could have had a negative impact on the price of the CEL token, and that this information could also be critical in resolving a dispute related to Celsius’ bankruptcy.

The creditors are seeking permission from the bankruptcy judge to issue subpoenas to FTX to obtain the requested information. The request for subpoenas was made in court papers filed on April 26. The information obtained from FTX could be important in resolving disputes related to Celsius’ bankruptcy.

Meanwhile, FTX is pending approval from the United States Bankruptcy Court for the District of Delaware to sell LedgerX, its futures and options exchange and clearinghouse, to an affiliate of Miami International Holdings for approximately $50 million. The sale is expected to provide FTX with the funds needed to pay back its creditors. A hearing to approve the sale is scheduled for May 4.

In conclusion, the Celsius creditors’ request for subpoenas to FTX reflects their efforts to investigate potential market manipulation of the CEL token. The information obtained from FTX could be crucial in determining whether the trades involving CEL were legitimate or constituted market manipulation, and could be important in resolving disputes related to Celsius’ bankruptcy. Meanwhile, FTX’s pending sale of LedgerX is expected to provide the exchange with the funds needed to pay back its creditors.

Binance and CEO Changpeng Zhao Face Class-Action Lawsuit Over Alleged Market Manipulation Targeting FTX

On October 2, 2023, plaintiff Nir Lahav filed a class-action lawsuit in the District Court of Northern California against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., and CEO Changpeng Zhao. The lawsuit accuses Binance and Zhao of unfair competition and violations of Security Exchange Commission (SEC) laws. The plaintiff alleges that Binance’s actions were aimed at monopolizing the cryptocurrency trading platform market at the expense of competitor FTX.

The lawsuit is detailed, citing multiple instances of alleged misconduct. It claims that Binance intentionally acted to harm FTX by liquidating its holdings in FTX’s utility token, FTT, and then misleading the public about it. The suit also accuses Binance of bait-and-switch tactics, stating that Zhao tweeted about Binance’s intent to acquire FTX but retracted the statement a day later, causing market instability.

The Role of Social Media

Central to the lawsuit are tweets made by Zhao on November 6, 2022. In these tweets, Zhao announced the liquidation of Binance’s holdings in FTT. According to the lawsuit, this tweet was misleading because Binance had already liquidated its FTT holdings the day before. The tweet allegedly led to a 14% decline in FTT’s price within 24 hours, causing significant market disruption.

Zhao’s subsequent tweet about Binance’s intent to acquire FTX, only to retract it a day later, is also under scrutiny. The plaintiff claims that these actions were calculated to harm FTX and led to its “rushed and unprecedented collapse,” affecting thousands of traders and investors.

SEC’s Regulatory Framework

The lawsuit delves into the SEC’s role in regulating cryptocurrency trading platforms. It argues that the SEC’s broad definitions of securities are deliberately designed to capture new financial instruments, including cryptocurrencies. The suit cites the Howey Test, a legal standard used to determine what constitutes a security, as a basis for its allegations against Binance.

The plaintiff is seeking monetary damages, court costs, and disgorgement of ill-gotten gains. The lawsuit states that there are potentially thousands of class members affected by Binance’s actions. Both Binance and FTX are currently subject to SEC actions, adding another layer of complexity to the case. If the allegations are proven, it could set a precedent for how cryptocurrency exchanges are regulated and could potentially reshape the competitive landscape of the industry.

Upbit's Massive LOOM Transactions Drive Market Fluctuations

Recent market activities indicate a significant movement of LOOM tokens associated with Upbit, a well-known digital asset exchange. Over the past 48 hours, Upbit has escalated the frequency of depositing LOOM to other exchanges, Binance and Bithumb, summing up to over 120 transactions. This movement, involving approximately 19 million LOOM tokens (valued around $6.76 million), coincides with a 35% dip in LOOM’s price within the same timeframe, according to Scopescan.

A wallet affiliated with Upbit now reportedly holds a staggering 653 million LOOM, about 50% of the token’s total supply, valued at approximately $181 million2. Additionally, on a separate occasion, Upbit withdrew 11,081,386 LOOM, valued at $2.9 million, and the exchange’s total LOOM holdings now account for 49.45% of the token’s circulating supply.

The high concentration of LOOM tokens by Upbit and the recent massive transfers to Binance and Bithumb could potentially be influencing LOOM’s market liquidity and price stability. The substantial holding and movement of LOOM tokens hint at a possible market manipulation scenario, which might be a contributing factor to the observed price volatility. Over the last month, LOOM’s price surged over 1000%, increasing its market capitalization significantly before this recent dip4.

The pattern of LOOM token movement, especially between exchanges, warrants close monitoring by both regulatory authorities and market participants. The prevailing market conditions surrounding LOOM tokens, orchestrated by hefty transactions associated with Upbit, reflect a broader narrative of market dynamics in the burgeoning cryptocurrency domain.

LOOM is the native otken of Loom Network. Loom Network, based on Ethereum, serves as a platform for developers to build large-scale decentralized applications. Launched on October 1, 2017, it enhances smart contract computing power while reducing costs for certain tasks. By allowing interaction with off-chain third-party APIs, Loom enables developers to integrate their applications with external systems seamlessly without changing the programming language.

Utilizing Plasma for faster transactions, Loom addresses scalability issues prevalent in blockchain networks. It stands out by enabling Ethereum Solidity applications to run on side chains with tailored consensus mechanisms. The LOOM token, essential for membership, facilitates access to all apps on the network and the transfer of digital assets between Ethereum and Loom DAppChains. Through the zkLoom protocol, it leverages Ethereum’s security infrastructure, ensuring a secure, cost-effective blockchain environment.

dYdX Utilizes $9M Insurance Fund Following Alleged Targeted Attack on YFI

The decentralized exchange (DEX) dYdX experienced a significant financial event on November 17, requiring the use of its insurance fund. The exchange had to cover $9 million worth of customer liquidations following a dramatic market fluctuation. Antonio Juliano, the creator of dYdX, labeled the event as a “targeted attack,” suggesting a deliberate attempt to destabilize the exchange’s financial stability.

Before November 17, the price of Yearn Finance (YFI) token surged by over 170%, only to plummet by 43% on the day of the incident. This abrupt price drop has raised concerns within the crypto community about potential market manipulation or even an exit scam. The focus of the alleged attack was on long positions in YFI tokens on the dYdX platform, leading to nearly $38 million in holdings being liquidated.

Juliano emphasized that the v3 insurance fund, despite the substantial payout, remains well-funded with $13.5 million. He reassured users that their funds were not impacted by the incident. In response to community concerns, dYdX announced that no user funds were affected and that an investigation is underway. Furthermore, dYdX is conducting a thorough review of its risk parameters and considering changes to both the v3 and potentially the dYdX Chain software to enhance security and prevent similar occurrences.

The crypto community has expressed alarm at the sudden market shift, with some speculating about insider involvement in manipulating the YFI market. Concerns were raised about the sufficiency of the remaining insurance fund and the steps dYdX is taking to prevent future attacks. There were claims that developers controlled multiple wallets holding a significant percentage of YFI tokens, though these claims were not conclusively backed by Etherscan data.

dYdX’s commitment to transparency in its investigation process is crucial in maintaining user trust. The team is collaborating with several partners to uncover the specifics of the incident and is expected to provide updates as new information emerges.

SEC Faces Congressional Investigation Call Over Bitcoin ETF False Approval News Breach

There has been a great amount of controversy and requests for an inquiry to be conducted by the United States authorities as a result of the recent security breach that occurred on the social media account of the United States Securities and Exchange Commission (SEC). This breach led to the fraudulent announcement of an approval for a Bitcoin exchange-traded fund (ETF). It is important to note that this episode brings to light significant concerns around cybersecurity, market manipulation, and the regulatory environment surrounding cryptocurrencies.

Overview of the Incident

As a result of the SEC’s official social media account being accessed, a bogus announcement was made about the approval of a Bitcoin exchange-traded fund (ETF). This led to a significant surge in the price of Bitcoin. Despite the fact that this illegal article was swiftly discovered and corrected, it had already had a considerable influence on the bitcoin market. Gary Gensler, the chair of the Securities and Exchange Commission, has acknowledged that the post was made without authorization, and that the account was lost owing to the absence of two-factor authentication.

Concerns Regarding the Market and Regulatory Issues

As a result of the bogus statement, the price of Bitcoin saw a momentary increase, which exemplifies the huge influence that regulatory news has on cryptocurrency markets. The Securities and Exchange Commission’s (SEC) cybersecurity safeguards and its capacity to preserve critical market-affecting information are called into doubt as a result of this occurrence. In spite of the fact that it is well-known for its stringent position on cryptocurrencies and investor safety, the Securities and Exchange Commission (SEC) finds itself in a strange situation, since its own security failure has led to worries of market manipulation.

Appeals for the Conduct of Investigations and Accountability

A comprehensive inquiry of the manner in which the Securities and Exchange Commission (SEC) has handled this matter is being demanded by legislators and legal experts in the United States. A number of criticisms have been leveled at the Securities and Exchange Commission (SEC) for failing to adhere to its cybersecurity standards and perhaps causing market manipulation. The event was described by Representative Ann Wagner as “clear market manipulation,” and other authorities expressed the sentiment that the Securities and Exchange Commission (SEC) must demonstrate responsibility and openness moving forward. This investigation comes at a crucial moment when the Securities and Exchange Commission (SEC) is set to make judgments on multiple applications for Bitcoin exchange-traded funds (ETFs).

Examining the Future: Cryptocurrency ETF and the Role of Regulatory Oversight

The SEC is under increasing scrutiny as a result of the episode, which has put a shadow on the future decisions involving Bitcoin exchange-traded funds (ETFs). It is with great anticipation that the market awaits the SEC’s position on these exchange-traded funds (ETFs), which has the potential to greatly impact the widespread adoption of cryptocurrencies. Nevertheless, this latest security incident highlights the difficulties that the Securities and Exchange Commission (SEC) has in striking a balance between the enforcement of regulations and the preservation of market integrity and investor confidence.

Crypto Exchange Bitsonic CEO Sentenced to 7 Years for $8.4 Million Fraud and Market Manipulation

The CEO of Bitsonic, a cryptocurrency exchange, has been sentenced to seven years in prison. The Seoul Eastern District Court found the executive guilty of inflating the market value and trading volume of a coin issued by the exchange and embezzling approximately 10 billion won (about $8.4 million USD) in customer deposits.

This case marks a significant moment in the ongoing effort to regulate the cryptocurrency market, which has been fraught with volatility and accusations of lack of transparency. The court’s decision sends a strong message to other cryptocurrency exchanges and their operators about the severe consequences of engaging in fraudulent activities.

The charges against the Bitsonic CEO included fraud under the Specific Economic Crimes Act, fabrication and use of electronic records, and obstruction of business by damaging computer systems. Alongside the CEO, Bitsonic’s Chief Technology Officer (CTO) was also convicted, receiving a one-year prison sentence for his role in creating and exploiting computer system failures to facilitate the fraud.

The court highlighted the misuse of the positions held by the CEO and CTO to disable the essential information processing functions of the cryptocurrency exchange. They created an illusion of legitimate trading activity, which significantly inflated the trading volumes. This deceitful practice led to the embezzlement of vast sums from numerous victims over an extended period.

The Bitsonic case is part of a broader context of regulatory and legal challenges facing the cryptocurrency industry globally. Governments and regulatory bodies worldwide are grappling with how to oversee a market that prides itself on decentralization and operates beyond the bounds of traditional financial systems. Incidents like these underline the urgent need for clearer regulations and more robust oversight to protect investors and maintain market integrity.

The repercussions of this case extend beyond the immediate legal consequences for the individuals involved. They highlight the vulnerabilities within the cryptocurrency market and the potential for abuse. As the industry continues to evolve, it will likely face increased scrutiny and demands for transparency and accountability.

This ruling also emphasizes the importance of due diligence by investors in the digital asset space. The allure of high returns often comes with high risks, especially in markets susceptible to manipulation and fraud. Investors are urged to research thoroughly and approach cryptocurrency investments with caution.

As the cryptocurrency market matures, the Bitsonic case may serve as a cautionary tale that steers the industry toward more ethical practices and contributes to the development of a safer, more transparent market for all participants.