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NFT Fraudulent Trading Boom Reported

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ByMarcel Bich

Apr 26, 2023
NFT Fraudulent Trading Boom Reported
Marcel Bich
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Fraudulent trading increased 126% in February reaching $580 million.

Footprint Analytics researchers along with CoinGecko published a report on the surge in wash trading of non-fungible tokens (NFTs) in February 2023. The volume of fraudulent trading was up 126% from the previous month, while the total wash trading volume reached $580 million.

According to the report, after a surge in NFT popularity in early 2022, the trading volume gradually declined throughout the year. However, at the beginning of 2023, the market began to recover and in February already reached $1.89 billion. Along with it, the number of fictitious transactions increased as well.

If in January the total volume of wash trading was $250 million, in February it reached $580 million, which means a growth of 126%. The researchers note that such growth is observed for the fourth month in a row.

Wash trading is a type of fraud where the same asset is bought and sold many times by the same person or a group of criminals working together. This way, one can manipulate the price of an asset and create an illusion of liquidity. Wash trading is prohibited in traditional financial markets.

The volume of wash trading reaches more than 80% on some exchanges

During the study, experts examined six major NFT trading platforms, namely LooksRare, OpenSea, Blur, Magic Eden, X2Y2, and CryptoPunks. X2Y2 with $150 million (25.8%), Blur with $80 million (13.8%), and LooksRare with $280 million (48.1%) had the highest number of wash trading transactions. In turn, OpenSea, the largest NFT trading platform in the world, reported $42.57 million in fake transactions, and Magic Eden reported $590,000 in fraudulent trades. Representatives of the CryptoPunks exchange said they had not encountered any illegal activity of this nature on their site at all.

According to the report, fraudulent transactions accounted for nearly a third (31.6%) of the total trading volume of the six marketplaces studied. In the case of X2Y2 and LooksRare, the share of laundered trading was 85% and 80.8%, respectively.

At the same time, the number of wash trading transactions on NFT marketplaces is generally lower than on unregulated cryptocurrency exchanges, according to a National Bureau of Economic Research (NBER) report. Unregulated crypto exchanges account for 77.5% of the total number of wash trading, while regulated crypto exchanges account for only 3%.

 
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Marcel Bich

Marcel ‘s passion for the world of cryptocurrencies and his comprehensive knowledge of blockchain technology make him an invaluable asset to our team. He stays updated on the latest trends, regulations, and emerging technologies in the crypto space, ensuring that our audience receives accurate and up-to-date information.