Three researchers from Sydney Australia, Ester Félez-Viñas, Luke Johnson and Tālis J. Putniņš, have alleged that Insider trading occurs in 10-25% of cryptocurrency listings in a research paper called “Insider trading in cryptocurrency markets”. The research paper uses crypto exchange Coinbase as a case study.
Insider Trading in crypto is worse than in stock market
Not until recently, insider trading in the crypto industry used to be more or less overlooked due to minimal regulation. This changed when the U.S. Department of Justice (DOJ) charged a Coinbase employee alongside his brother and their friend with wire fraud and insider trading in July.
The research paper by these academics from the University of technology Sydney uses blockchain data to identify perpetrators of insider trading who are yet to be prosecuted. Using an internet archive site, they analyse all of coinbase’s listing announcements and processes from September 2018 until May 2022.
Generally, they found that insider trading in crypto markets runs even more than in stock markets and profits from insider trading are estimated to be almost always around 1003 ETH ($1.5 million). This is achieved by selling the tokens soon after the listing announcement.
Our analysis shows significant price run-ups before official listing announcements, similar to prosecuted cases of insider trading in stock markets, according to the paper written by the researchers, These findings point to cryptocurrency markets being susceptible to the same forms of misconduct that regulators have for a long time grappled with in traditional financial markets.
More trouble for Coinbase
Coinbase reportedly lost more than $1 billion in the second quarter. The California-based company seems to be struggling lately as it also recently laid off around 1100 staff across the globe in one of the most shocking layoffs in the industry.
it has also gone from the $462 billion it obtained in 2021 to just about $217 billion as reported by CoinDesk.
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