A study found that about 56% of ERC-20 tokens underwent suspicious manipulation before being listed on the three largest centralized cryptocurrency exchanges (CEXs).
Cybersecurity firm Solidus Labs conducted an extensive study of the DeFi market, revealing clear signs of insider trading. According to Bloomberg, the study showed suspicious transactions with 56% of ERC-20 tokens at their initial listing on centralized crypto exchanges.
A detailed analysis of data collected since January 2021 showed that signs of insider trading were detected on decentralized platforms, where tokens are typically available for trading even before their official listing on CEX. A total of 411 suspicious trades were identified, each linked to more than 100 cryptocurrency wallet addresses. The owners of these addresses used various DeFi platforms, including DEX, to buy tokens, and sold them at a higher price after the listing was announced on the centralized exchange.
Solidus Labs analysts point out that such manipulations were often carried out on DEX, where users can trade directly with each other without disclosing their identity. Thus, the level of insider trading on decentralized exchanges was even higher than on traditional stock markets.
Some previous DeFi market research also confirms the increased level of insider trading. For example, about a quarter of all listings on the Coinbase crypto exchange showed an abnormal level of profitability.
